538 1 RP-1999-0044 2 3 THE ONTARIO ENERGY BOARD 4 5 IN THE MATTER OF the Ontario Energy Board Act, 1998; 6 7 AND IN THE MATTER OF an Application by Ontario Hydro 8 Networks Company Inc., for an Order or Orders approving 9 year 2000 transmission cost allocation and rate design. 10 11 12 B E F O R E : 13 R.M. HIGGIN Presiding Member 14 P. VLAHOS Member 15 B. SMITH Member 16 17 18 Hearing held at: 19 2300 Yonge Street, 25th Floor, Hearing Room No. 2 20 Toronto, Ontario on Monday, February 21, 2000, 21 commencing at 0932 22 23 HEARING 24 25 VOLUME 4 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 539 1 APPEARANCES 2 JENNIFER LEA/ Counsel to Board Staff 3 MICHAEL LYLE 4 5 HAROLD THIESSEN/ Board Staff 6 NABIH MIKHAIL/ 7 COLIN SCHUCK 8 9 DONALD ROGERS/ Ontario Hydro Networks 10 BRYAN BOYCE Company Inc. (OHNC) 11 12 DAVID BROWN Independent Power Producers 13 Society of Ontario (IPPSO); 14 Ontario Natural Gas 15 Association (ONGA) 16 17 JAMES FISHER/ Association of Major Power 18 19 KEN SNELSON Consumers in Ontario (AMPCO) 20 21 MICHAEL JANIGAN Vulnerable Energy Consumers 22 Coalition (VECC) 23 24 ROBERT WARREN Consumers Association of 25 Canada (CAC) 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 540 1 APPEARANCES (Cont'd) 2 BRUCE CAMPBELL/ Ontario Power Generation 3 JOEL SINGER/ (OPG) 4 JOHN RATTRAY 5 6 LLOYD GREENSPOON NorthWatch 7 8 DAVID POCH Green Energy Coalition (GEC) 9 10 MARK MATTSON Energy Probe 11 12 PETER BUDD TransAlta Energy 13 14 MURRAY KLIPPENSTEIN Pollution Probe 15 16 RICHARD STEPHENSON Power Workers Union 17 18 MARK RODGER Toronto Hydro Electric 19 System Ltd. 20 21 PAUL DUMARESQ Ontario Association of Physical 22 Plant Administrators 23 24 SHARON WONG Imperial Oil Ltd. 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 541 1 APPEARANCES (Cont'd) 2 ERIK GOLDSILVER Electrical Contractors 3 Association of the Ontario; 4 Collingwood Public Utilities 5 Commission 6 7 ROGER WHITE Energy Cost Management Inc. 8 9 RICHARD KING Five Nations Energy Inc.; 10 Detroit Edison Co. 11 12 KENNETH LIDDON Suncor Energy Inc. 13 14 GEORGE VEGH/ Amoco Canada (BP Amoco); 15 JEAN-PAUL DESROCHERS Toromont Energy 16 17 KEITH RAWSON TransCanada Energy 18 19 PAUL VOGEL/ The Chiefs of Ontario 20 CAROL GODBY 21 22 ALAN MARK/ Municipal Electrical 23 KELLY FRIEDMAN/ Association (MEA) 24 MAURICE TUCCI 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 542 1 APPEARANCES (Cont'd) 2 WENDY EARLE/ Brampton Hydro, Cambridge 3 JAMIE SIDLOFSKY and North Dumfries Hydro, 4 Guelph Hydro, Niagara Falls 5 Hydro, Oakville Hydro, 6 Richmond Hill Hydro, 7 Pickering Hydro and Waterloo 8 North Hydro 9 10 RICK COBURN INCO Limited; Ontario Mining 11 Association 12 13 TED COWAN Ontario Federation of 14 Agriculture 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 543 1 Toronto, Ontario 2 --- Upon resuming on Monday, February 21, 2000 3 at 0932 4 THE PRESIDING MEMBER: Thank you. Please be 5 seated. 6 Good morning everybody. I hope you had a good 7 weekend. The storm didn't actually amount to a heck of 8 a lot as it turned out, but it was probably advisable to 9 shut down on Friday. 10 Are there any preliminary matters, any 11 undertakings or anything? Mr. Rogers. 12 PRELIMINARY MATTERS 13 MR. ROGERS: Thank you, Mr. Chairman. 14 I can speak to several undertakings. I 15 believe there are three outstanding. I can advise the 16 Board that Undertaking F3.2, which requested an impact 17 analysis of a suggestion that the exemption for 18 generation be 20 megawatts, we are seeking advice from 19 the consultants. It's doubtful that we can provide an 20 answer to that, but we are still trying to get 21 information from the consultants and I will report back 22 to the Board. 23 Undertaking F3.3 requested the company to 24 provide details of a range of impacts around the median 25 on Table 5 of Exhibit D. I can advise the Board that I 26 am instructed that as the column headed "Other LDCs" 27 represents LDCs that do not have any embedded generation 28 added, the impact on these LDCs will be identical and Les Services StenoTran Services Inc. 613-521-0703 544 Preliminary Matters 1 there is no dispersion around this mean. 2 The third outstanding undertaking was F3.1, in 3 which the company was asked to recalculate the rates in 4 column 3 of Table 6 in this exhibit, using an assumption 5 of 1,150 megawatts being installed and we have a table 6 in which those rates are displayed. I think that is 7 being distributed now. I hope the Board has copies. It 8 is marked Undertaking F3.1. I would like to ask Mr. 9 Poray to explain the table to the Board. 10 PREVIOUSLY SWORN: DAVID CURTIS 11 PREVIOUSLY SWORN: ANDY PORAY 12 MR. PORAY: What we have done, if we look at 13 Table 6 there are four columns in the original Table 6. 14 In the handout now we have an additional column between 15 the original columns 2 and 3, and this column is titled 16 "Network 100 Per Cent Net Load Billing for 17 Cogeneration," "Network 100 Per Cent Gross Load Billing 18 for Other Generation," and "Connection 100 Per Cent 19 Gross Load Billing." This is essentially Option 4A of 20 Exhibit D, Tab 5, Schedule 2, page 6. 21 MR. ROGERS: Does that explain everything you 22 wanted to say about it? 23 MR. PORAY: I think so. 24 MR. ROGERS: Thank you very much. 25 Thank you, sir. 26 THE PRESIDING MEMBER: Are there any other 27 preliminary matters? 28 Being none, we will go to Mr. Mattson who is Les Services StenoTran Services Inc. 613-521-0703 545 Preliminary Matters 1 next. 2 Thank you. 3 MR. MATTSON: Thank you, Mr. Chairman. 4 Mr. Chairman, I might just note, I have to be 5 out of town, in Brockville this afternoon, so I will be 6 leaving after my cross-examination and I will be back 7 Wednesday morning. Mr. Hilson will be here in my place. 8 Thank you. 9 FURTHER CROSS-EXAMINATION 10 MR. MATTSON: Dr. Poray and Mr. Curtis, just 11 to begin, during the course of the past several days of 12 cross-examination it has been mentioned a couple of 13 times that this is your first hearing where you have 14 actually testified before the Ontario Energy Board 15 MR. CURTIS: Yes, that's correct. 16 MR. MATTSON: In fact, this is the first 17 hearing before the Ontario Energy Board where the Board 18 in fact has binding decision-making authority over 19 Ontario Hydro's rate-making procedures -- is that 20 fair -- in maybe decades and decades? 21 MR. CURTIS: They did have that authority with 22 our submission back in December, but I think we would 23 broadly agree with what you are stating, yes. 24 MR. MATTSON: Certainly at that hearing there 25 wasn't the process of cross-examination and -- 26 MR. CURTIS: That's correct. 27 MR. MATTSON: In the past, your company when 28 it came to making rates or setting rates, basically, put Les Services StenoTran Services Inc. 613-521-0703 546 OHNC PANEL 1, cr-ex (Mattson) 1 together your own proposal, brought it before the Board, 2 reviewed it publicly and regardless of the Board's 3 decision ultimately it was your board of directors and 4 the government who was responsible for the decision that 5 ultimately went out with respect to rates. Is that 6 fair? 7 MR. CURTIS: That's correct. 8 MR. MATTSON: So, you really are in a 9 different position in this hearing as Ontario Hydro 10 Service Company, are you not, in that it is really no 11 longer your decision with respect to setting these 12 rates. It's the Board's decision. Is that fair? 13 MR. CURTIS: That's correct. 14 MR. MATTSON: And to date you have been 15 involved in what you have suggested has been a 16 meaningful stakeholder consultation process where what 17 you have been doing in effect has been collecting all 18 the positions of the different parties, bringing them 19 together and putting them before the Board. Is that 20 fair? 21 MR. CURTIS: Yes, and I guess to go further, 22 we have tried to assess the inputs that we have received 23 from stakeholders to put together a submission for the 24 Board. 25 MR. MATTSON: For example, you have tried to 26 assess what the impacts on beneficial and negative 27 impacts might be on different customer classes if 28 certain intervenors or stakeholders' options were Les Services StenoTran Services Inc. 613-521-0703 547 OHNC PANEL 1, cr-ex (Mattson) 1 implemented. Is that fair? 2 MR. CURTIS: That's fair. 3 MR. MATTSON: And in terms of those 4 stakeholders we haven't really been able to identify 5 their different interests on the record to date and I 6 would just like to go over some of them. You have what 7 I would call customers, those are those who will be 8 purchasing power and those customers would be, for 9 example, the MEAs, the LDCs, the AMPCOs, clients, small 10 customers, et cetera. They were generally, we would 11 call those people customers with their buying power. Is 12 that fair? 13 MR. CURTIS: Yes, we would term those load 14 customers. Yes. 15 MR. MATTSON: And you have also in terms of 16 who you have called customers, you have also included 17 those who produce power, such as IPPSO and the Ontario 18 Power Generation? 19 MR. CURTIS: That's correct, those are our 20 generator customers, yes. 21 MR. MATTSON: So when you speak of customers 22 you are speaking of both producers and purchasers of 23 power? 24 MR. CURTIS: That's correct. 25 MR. MATTSON: And I think you were quite clear 26 on Friday that in terms of the gross load billing, net 27 load billing debate, it's the customers who will be 28 paying, not the generators. Is that fair? I am using Les Services StenoTran Services Inc. 613-521-0703 548 OHNC PANEL 1, cr-ex (Mattson) 1 customers in terms of those who purchase power who will 2 be paying, not those who produce power? 3 MR. CURTIS: That's correct. Both customers 4 would be paying, yes. 5 MR. MATTSON: So if net load billing, as 6 opposed to gross load billing or some variation, if we 7 have a variation of net load billing for certain 8 customers, it's certain customers who will have the 9 option of getting that reduced rate or that preferential 10 rate because the producer has certain characteristics 11 that qualify them for gross or net load billing. Is 12 that fair? 13 MR. CURTIS: That's correct. It would be the 14 load customer that would have that choice. 15 MR. MATTSON: So, if you are a customer who 16 has the capability or the ability to make those deals 17 with producers, then a net load billing would be 18 beneficial to those customers, but if you are a customer 19 who doesn't have that capability to make those deals, 20 those separate deals with producers, then ultimately net 21 load billing would be of no advantage to them. Is that 22 fair? 23 MR. CURTIS: And to go further than that, 24 there would be a redistribution of costs to those 25 customers that did not have that advantage, yes. 26 MR. MATTSON: Right. 27 In terms of the Ontario Energy Board, past 28 advisory decisions or reviews of these rates, what they Les Services StenoTran Services Inc. 613-521-0703 549 OHNC PANEL 1, cr-ex (Mattson) 1 call them is that the impact would be on the 2 non-participating customers. They are the ones who were 3 not able to take advantage of these rates? 4 MR. CURTIS: That's correct, yes. 5 MR. MATTSON: So if the producers and some of 6 the customer groups who are able to take advantage of 7 these rates on a gross load billing basis did so, those 8 who were able to participate would get the advantages 9 and those who weren't able to participate not only 10 wouldn't get the advantage, but would have to pay for 11 the advantages of those who participate? 12 MR. CURTIS: Yes, that's correct, except you 13 stuck gross load in your phase. I think you meant net 14 load. 15 MR. MATTSON: Net load, sorry. 16 MR. CURTIS: Yes. 17 MR. MATTSON: Thank you. 18 Again, this is not a decision that your 19 company is willing to make. You are asking the Ontario 20 Energy Board to make this decision. Right? 21 MR. CURTIS: Yes, we are. We have endeavoured 22 in terms of what we put together to try and strike a 23 balance in this, but ultimately it would be the Ontario 24 Energy Board that would make the decision in this 25 matter. 26 MR. MATTSON: In terms of you striking a 27 balance, you haven't balanced it out based on 28 principles. You have just used the sort of melting pot Les Services StenoTran Services Inc. 613-521-0703 550 OHNC PANEL 1, cr-ex (Mattson) 1 approach where you have brought them all together and 2 you have said, well, here is a sort of a middle ground. 3 MR. CURTIS: I think that characterizes it, 4 yes. 5 MR. MATTSON: Because during the course of the 6 cross-examinations you have been quite -- when we deal 7 with coincident and non-coincident peak, I mean for 8 example we had the option you put forward, the option 9 you preferred if you were thinking about your customers 10 and then we had the option that you would put forward if 11 you had to think about no one else but for yourself. Do 12 you recall that? 13 MR. CURTIS: Yes. 14 MR. MATTSON: So if a certain customer group, 15 if the Board accepts a net load billing or a variation 16 of it of 50 per cent of net load billing or any sort of 17 special rate for certain producers, the customer who 18 actually would have to pay, the non-participating 19 customer would have to pay for these rates shouldn't be 20 complaining to your company then, should they, or to the 21 government? They would have to complain to the Board. 22 Right? It's their decision? 23 MR. CURTIS: It would be taken to the Board, 24 yes. 25 MR. MATTSON: Okay. Now, just in terms of 26 what has taken place since the last Board's hearing is 27 that you have come forward with an unbundled rate 28 proposal here, correct? Les Services StenoTran Services Inc. 613-521-0703 551 OHNC PANEL 1, cr-ex (Mattson) 1 MR. CURTIS: Yes, that's correct. 2 MR. MATTSON: Just by doing that, by 3 unbundling these rates, it means that producers, for 4 example, again like IPPSO's clients, can go directly to 5 potential customers and make a deal for power without 6 needing your approval. Is that fair? 7 MR. CURTIS: That is correct, yes. 8 MR. MATTSON: So whereas in the past IPPSO 9 would have to go to Ontario Hydro to get an agreement in 10 order to produce power and have it sold, by unbundling 11 the rates IPPSO can go directly to customers now, can't 12 they? 13 MR. CURTIS: Yes. Yes, they can buy their 14 power from whomever they want. Once open access is 15 declared, yes. 16 MR. MATTSON: That's right. They don't need 17 gross load billing or net load billing, I mean, do they? 18 They don't need net load billing in terms of going to 19 their customers? They just need to convince their 20 customers that they can give a competitive rate? Is 21 that fair? 22 MR. CURTIS: That's fair, yes. 23 MR. MATTSON: If in fact net load billing was 24 adopted it would just give those producers a little 25 extra marketing, in terms of convincing customers that 26 they can produce or they can provide cheaper power, 27 because they would be avoiding some of these embedded 28 transmission costs, correct? Les Services StenoTran Services Inc. 613-521-0703 552 OHNC PANEL 1, cr-ex (Mattson) 1 MR. CURTIS: That would give them that 2 additional benefit. 3 MR. MATTSON: And IPPSO had rates with Ontario 4 Hydro prior to this hearing, special rates, did they 5 not? There was an IPPSO rate, a bundled one? 6 MR. CURTIS: A rate for non-utility 7 generators, a bundled one, yes. 8 MR. MATTSON: That's right? 9 MR. CURTIS: Yes. 10 MR. MATTSON: Certainly, the other major 11 customers at this hearing, or one of the major 12 customers, the AMPCO group, AMPCO also had special rates 13 for their clients prior to this hearing, did they not? 14 MR. CURTIS: Many of the direct customers did 15 have special rates, yes. 16 MR. MATTSON: So if in fact the Board chose 17 to go with the unbundled rates and chose to not adopt 18 net load billing but rather a gross load or some form of 19 gross load billing, really, it would be a change for 20 both the producers and those customers, IPPSO and the 21 AMPCO customers, in that they would no longer have those 22 deals with your company. They would have to go out and 23 actually seek the deals and sort of everybody would be 24 treated equally. Is that fair? 25 MR. CURTIS: Yes. That is the basis of our 26 proposal that all customers are treated equally. 27 MR. MATTSON: Thank you. 28 With respect to those who seek to have Les Services StenoTran Services Inc. 613-521-0703 553 OHNC PANEL 1, cr-ex (Mattson) 1 greener, more efficient energy generation, those 2 customers are also able to go to the market and seek to 3 find producers who provide that cleaner energy now, are 4 they not? 5 MR. CURTIS: That's correct, once open access 6 is declared. 7 MR. MATTSON: That's right, and there is 8 nothing holding them back either from going out and 9 paying for that energy is there? 10 MR. CURTIS: No, there isn't. 11 MR. MATTSON: So they are in a different 12 position than they were in the past before, as well, 13 right? In the past they had to go to Ontario Hydro and 14 convince them that they should adopt these greener and 15 more conservation-minded generation tactics, but now 16 they no longer have to. They can go directly to the 17 customers, correct? 18 MR. CURTIS: They can buy from whatever 19 generator they wish, yes. 20 MR. MATTSON: All right. While there are all 21 these benefits of the unbundled rates we also have to 22 deal with what many people have talked about -- they are 23 not stranded assets, but I guess they potentially could 24 be. They are embedded costs of the system, correct? 25 MR. CURTIS: Yes. 26 MR. MATTSON: They have to be dealt with as 27 well, correct? 28 MR. CURTIS: Yes, that was correct. Les Services StenoTran Services Inc. 613-521-0703 554 OHNC PANEL 1, cr-ex (Mattson) 1 MR. MATTSON: That is really what this gross 2 load billing/net load billing debate comes down to, 3 isn't it? It is how you are going to recover those 4 costs? 5 MR. CURTIS: That is the main component of it, 6 yes it is. 7 MR. MATTSON: Okay. 8 It seems to me then when I look at the last 9 words of the Board in the last hearing Ontario Hydro 10 Rates HR-24 1996, it seems like your company is taking 11 those words to heart. Let me read them. They are at 12 page 147, Recommendation 9.2. It says: 13 "The Board recommends that Hydro not come 14 forward with further rate proposals until 15 it is able to deal in a meaningful way 16 with the issues of stranded assets, 17 unbundling of rates, and effective public 18 review of load retention applications." 19 It seems to me like you have done that. You 20 haven't come forward until today and now you are dealing 21 with -- you have effective public review, you have 22 unbundled your rates and in the gross load/net load 23 billing debate you are trying to deal with those 24 embedded costs. 25 MR. CURTIS: We are certainly trying, yes. 26 MR. MATTSON: Congratulations. You have 27 really -- the last words of the Board and this is the 28 next hearing and you have accomplished that. Is that Les Services StenoTran Services Inc. 613-521-0703 555 OHNC PANEL 1, cr-ex (Mattson) 1 fair? 2 MR. CURTIS: We have endeavoured to do that, 3 yes, sir. 4 MR. MATTSON: However, many of the parties who 5 were at those past hearings when these embedded costs 6 were approved and put into the rates, they are also at 7 this hearing, are they not? 8 MR. CURTIS: They are indeed, yes. 9 MR. MATTSON: They want some special rates 10 back in this new regulated electricity rates 11 marketplace, do they not? They want some special 12 exemptions again? 13 MR. CURTIS: Certainly, what they put forward 14 to us throughout the stakeholdering process, the 15 position they put forward is that they would need these, 16 like a gross load relief, if you will, for their 17 projects to go forward, yes. 18 MR. MATTSON: At least it seems from their -- 19 we will hear from them later in the hearing -- at least, 20 at this point anyway, it seems that the unbundling of 21 the rates, the effective public review of rate setting 22 in Ontario and dealing with some of the embedded costs 23 is not enough for those groups. They want more than 24 just those three things. Is that fair? That is not 25 enough for them to compete, they need more? 26 MR. CURTIS: That is the position that they 27 put forward, yes, to us. 28 MR. MATTSON: I am just reviewing all the Les Services StenoTran Services Inc. 613-521-0703 556 OHNC PANEL 1, cr-ex (Mattson) 1 evidence at the hearing. It seems as though you are the 2 only party to the hearing who really has no deadline or 3 no end to this gross load billing rate. It seems like 4 you potentially -- it could either go a day or it could 5 go 100 years as far as your proposal. It is up to the 6 Board. You see no end state for the gross load billing. 7 Is that fair, you are the only party who sees that? 8 MR. CURTIS: I think that the position that we 9 put forward in terms of resolving the net load versus 10 gross load issue, we had a short-term component and a 11 longer term component, and it was that contracting base 12 that we saw as a longer term net. But if you are 13 talking about a time period here, I think it has been 14 characterized to us that we have a 25-year relationship 15 with the Board going here to try and solve or address 16 some of these issues. 17 MR. MATTSON: Right. Of all your stakeholders 18 they all see an end -- they all see the end of when the 19 gross load billing is necessary. Is that fair? 20 MR. CURTIS: Yes. 21 MR. MATTSON: Long term, that all the parties 22 to the process agree is the appropriate rate ultimately 23 for transmission rates would be a net load billing rate, 24 correct? 25 MR. CURTIS: That's correct. 26 MR. MATTSON: It is just a matter of time, and 27 the reason we need to deal with it over time is to deal 28 with the embedded costs. Is that fair? Les Services StenoTran Services Inc. 613-521-0703 557 OHNC PANEL 1, cr-ex (Mattson) 1 MR. CURTIS: That's right. 2 MR. MATTSON: All right. 3 But you would also agree with me, I am sure, 4 the fact that you have left it open ended, Mr. Curtis, 5 doesn't mean that you would like to see it left open 6 ended. You would like to see this resolved at this 7 hearing once and for all as well, right, because that 8 would give some certainty to all your customers and 9 producers? 10 MR. CURTIS: Not only us, but also our 11 customers and our stakeholders have voiced that as well, 12 less regulatory uncertainty would be better. 13 MR. MATTSON: It will be great if this could 14 be -- 15 MR. CURTIS: Yes. 16 MR. MATTSON: -- determined once and for all 17 by the Board at this hearing? 18 MR. CURTIS: Yes. 19 MR. MATTSON: That's what you want? 20 MR. CURTIS: Yes. I think on behalf of 21 ourselves and the rest of our stakeholders, yes. 22 MR. MATTSON: All right. 23 Those are all my questions. 24 Thank you. 25 THE PRESIDING MEMBER: Thank you, Mr. Mattson. 26 Mr. Poch, please. 27 FURTHER CROSS-EXAMINATION 28 MR. POCH: Thank you, Mr. Chairman. Les Services StenoTran Services Inc. 613-521-0703 558 OHNC Panel 1, cr-ex (Poch) 1 Now, just on Mr. Mattson's question, you are 2 not proposing a special discount for anybody, are you, 3 in the net versus gross? Isn't it fairer to say what 4 you are proposing is that for certain classes of 5 generators who don't qualify you are going to put a 6 surcharge on them to gross them up and for others you 7 are going to put a 50 per cent surcharge on them above 8 what the meter says? 9 MR. CURTIS: I think that would be a fair way 10 of characterizing it as well, yes. 11 MR. POCH: I have some other follow-up 12 questions. I should preface my questions, Mr. Chairman, 13 saying I have had a chance to talk with some of the 14 greener counsel in the room and we are trying to 15 coordinate cross. My cross will be a bit lengthy but I 16 think you will see the economy when we get to the other 17 parties. 18 Now, Mr. Fisher, way back when, started off 19 his cross asking you about the status quo versus your 20 proposal. There was a lot of to-ing and fro-ing on 21 whether we were moving from a net situation. I think it 22 was left a little unclear because I think it was 23 Dr. Poray kept saying, "Well, it was net on an energy 24 basis." Do you recall that conversation? 25 MR. PORAY: Yes, I think I recall that. Yes. 26 MR. POCH: I understood your point that we 27 were moving from a bundled to an unbundled world. But 28 can we be clear about this. In the past, if someone Les Services StenoTran Services Inc. 613-521-0703 559 OHNC Panel 1, cr-ex (Poch) 1 chose to put in a generator that was, to make the 2 example simple, exactly equal their existing load they 3 would face no more charges from the bundled Ontario 4 Hydro, nothing for energy and nothing for transmission. 5 Correct? 6 MR. CURTIS: I wouldn't necessarily say face 7 nothing. It depends on the terms of the contract that 8 was negotiated with that customer. Certainly, in 9 instances like that there were often considerations as 10 far as back-up -- 11 MR. POCH: Fair enough. 12 MR. CURTIS: -- that would be involved, and 13 they may have had some other considerations included 14 that if they wouldn't -- 15 MR. POCH: If they were paying you for 16 site-specific transformation, for example, or if they 17 were sharing in some costs like that, they would 18 continue to be responsible under whatever contract you 19 had for the contribution? 20 MR. CURTIS: That is correct. 21 MR. POCH: But they wouldn't be paying the 22 transmission rate, however you would extricate that from 23 the bundled rate. 24 MR. CURTIS: I think that is really what the 25 difficulty is, Mr. Poch, is that we were talking when we 26 were within Ontario Hydro about all of these costs 27 bundled together. We never had any discussions about 28 the specific transmission component with customers' -- Les Services StenoTran Services Inc. 613-521-0703 560 OHNC Panel 1, cr-ex (Poch) 1 MR. POCH: You never attempted to segregate 2 out transmission and charge it to such individuals 3 although you were entitled to do so. 4 MR. CURTIS: That's correct. 5 MR. POCH: Correct? You could have -- I'm 6 sorry. Go ahead. 7 MR. CURTIS: I suppose we could have, but we 8 never did. They were always bundled contracts that were 9 negotiated. 10 MR. POCH: All right. 11 Mr. Brown had some questions to you which 12 elicited the hum-along response. I think you will 13 recall that. 14 MR. CURTIS: Yes, I do. 15 MR. POCH: And just to jog our memories, hum 16 along were such services, ancillary services, I believe 17 you called them, as voltage support, frequency control, 18 reactive support. Correct? 19 MR. CURTIS: Those are examples of them, yes. 20 MR. PORAY: Maybe I should clarify that those 21 services are really what one would term ancillary 22 services that are offered in the marketplace. The hum 23 along is really the concept of having those services 24 delivered through the transmission system. In other 25 words, there is a benefit to continue to be connected to 26 the transmission system, and that is what hum along is 27 about. 28 MR. POCH: All right. Les Services StenoTran Services Inc. 613-521-0703 561 OHNC Panel 1, cr-ex (Poch) 1 Could we just be clear that those ancillary 2 services go both ways, that for a generator it can 3 benefit by having frequency control, for example, or 4 reactive support or voltage support. It also provides 5 those services when it is up and running to the grid and 6 other generators and loads. Correct? 7 MR. CURTIS: That is correct. However, there 8 is a difference in terms of the proportionality here 9 that -- 10 MR. POCH: Absolutely 11 MR. CURTIS: -- is important to consider. 12 MR. POCH: It has something to do with the 13 scale of the generator. 14 MR. CURTIS: That's correct. Yes. 15 MR. POCH: And when you have a great many 16 generators, small generators, there would be some 17 benefit to the system in diversity in terms of the 18 provision of those services. Correct? 19 MR. CURTIS: Yes, there would. 20 MR. POCH: They are not all going to be down 21 at once. 22 MR. CURTIS: That's correct. 23 MR. POCH: As opposed to, say, a very large 24 generator, when it goes down you might have to scramble. 25 Both the IMO may have to scramble and you as the 26 operator of transmission may have to scramble to keep 27 everything in balance. 28 MR. CURTIS: However, the system has been Les Services StenoTran Services Inc. 613-521-0703 562 OHNC Panel 1, cr-ex (Poch) 1 designed to accommodate that, and the operation 2 procedures that you are talking about have been in place 3 for quite a number of years to contend with those 4 situations. 5 MR. POCH: Many of those would be automated. 6 MR. CURTIS: Yes. Right. 7 MR. POCH: As you say, you have designed the 8 system because you have faced those large contingencies 9 that were inherent with large generation and with the 10 interconnections, for example. 11 MR. CURTIS: That is correct, yes. 12 MR. PORAY: Excuse me, Mr. Poch. Maybe I 13 should just add in here the fact that those ancillary 14 services that we are talking about are not necessarily 15 required only when the generator is out of service. 16 Under normal operating conditions you do have 17 fluctuations in load, the load changes from one phase to 18 another, so you do need these load following type 19 generations, and not every generator is able to follow 20 load. 21 MR. POCH: Right. 22 So just in terms of balancing generation and 23 load, obviously that is one aspect of managing the 24 system that has to be, is your point. I take it that 25 is -- 26 MR. PORAY: That's quite correct. 27 MR. POCH: All right. 28 We can agree that in a more decentralized, Les Services StenoTran Services Inc. 613-521-0703 563 OHNC Panel 1, cr-ex (Poch) 1 diverse system some of these concerns are somewhat 2 mitigated? 3 MR. CURTIS: Yes. 4 MR. POCH: Now, further on in discussing that 5 topic you said that small units may need some of these 6 services -- and I think you were referring to reactive 7 support, for example -- particularly when they are in a 8 start-up mode. Is that correct? 9 MR. CURTIS: Yes. 10 MR. POCH: Again, can we just agree that if we 11 have a great many such small generators, as a group some 12 would be providing such service, some would be taking 13 such service at any given time. 14 MR. CURTIS: Yes. And that is the way it is 15 across the system right now with all generators. 16 MR. POCH: Yes. Exactly. Okay. Thank you. 17 Before I move into the question of rate 18 shifting, I just want to make sure that the question of 19 revenue recovery for the utility -- I take it that does 20 not figure large as an issue in -- hasn't figured large 21 in the issues we have discussed thus far. I take it in 22 any of the proposals that we are talking about here that 23 is not a big issue for you. You are relatively 24 confident that all of the proposals on the table address 25 that need adequately. 26 MR. CURTIS: Yes, that's correct. I think we 27 stated that in our direct evidence at the beginning. 28 MR. POCH: I think you have said several times Les Services StenoTran Services Inc. 613-521-0703 564 OHNC Panel 1, cr-ex (Poch) 1 the key issue is rate shifting. 2 Dr. Poray, I think more than once you have 3 said that you are looking at the transmission rate 4 structure to correct the sunk costs of the existing 5 system, and you looked a little puzzled when people 6 expected to also send a forward-looking price signal for 7 appropriate future behaviour. 8 Have I taken the tone of your evidence 9 correctly, that primarily you are viewing this rate 10 structure as a means to fairly collect for sunk costs? 11 MR. CURTIS: That is correct. 12 MR. POCH: All right. 13 When I turned to Bonbright and saw -- I was 14 looking at Exhibit G1.2, if you want the reference, at 15 item 5, and I will read it to you so you don't need to 16 turn -- 17 MR. ROGERS: Let us get it before, Mr. Poch, 18 to be sure they are in context. 19 MR. POCH: Sure. This was the separate 20 handout, G1.2. 21 --- Pause 22 MR. PORAY: Okay. We have it. 23 MR. POCH: It is page 383 of the excerpt we 24 were given, item 5, which reads: 25 "Reflection of all of the present and 26 future private and social costs and 27 benefits occasioned by a service's 28 provision (i.e., all internalities and Les Services StenoTran Services Inc. 613-521-0703 565 OHNC Panel 1, cr-ex (Poch) 1 externalities)." 2 I took that as a fairly broad statement from 3 Professor Bonbright that we should be looking at 4 including a price signal for future costs that are going 5 to be imposed on -- or incurred if load or generation 6 goes in a certain direction. Is that fair? 7 MR. PORAY: I think we interpreted that to 8 mean it is the present and future costs in terms of the 9 costs incurred by the transmission company in operating 10 its presence. 11 MR. POCH: Sure. And by including "future", 12 that is another way of saying people should be getting a 13 price signal about what the future costs are that are or 14 are not avoidable. 15 MR. PORAY: Well, I think here is where 16 perhaps we would diverge in the way we interpret this 17 because, in a sense, in order to be able to do that you 18 would have to have some view of the future in terms of 19 how perhaps the transmission system will expand to 20 accommodate new generation. 21 However, the paradigm has shifted in the sense 22 that that is no longer the sole responsibility of the 23 transmission company, that a lot of that will be done 24 interactively through the marketplace and the 25 transmission company will be one of the participants 26 that may come forward with proposals, but it is by no 27 means the only one and, therefore, it doesn't have the 28 sort of long-term planning perspective it used to have. Les Services StenoTran Services Inc. 613-521-0703 566 OHNC Panel 1, cr-ex (Poch) 1 MR. POCH: In looking at the proposals that 2 you have come forward with and you feel balance the 3 various interests, and I think you have used that phrase 4 a lot, the Board should be cognizant that that's a 5 balance that met your needs given that view, that you 6 don't view the purpose of this rate structure as giving 7 a forward looking price signal particularly. 8 MR. PORAY: I would agree with that, yes. 9 MR. POCH: All right. Now, whether one wishes 10 to include a forward looking price signal or not, it 11 seems to me that, correct me if I'm wrong, you have 12 tried to go as far as you can in accommodating the 13 express needs of the various parties and that the 14 constraint, the key constraint, has been this concern 15 for revenue shift. 16 MR. PORAY: That's a fair summation. 17 MR. POCH: All right. So in looking at the 18 evidence then, your rate impact analysis is really one 19 of the central guiding pieces we should turn to in 20 evaluating options. That's what you would propose. 21 MR. PORAY: That's correct. 22 MR. POCH: All right. Now, I have a number of 23 questions on that topic. First of all, a follow-up, Mr. 24 Stephenson directed you to the figure of, I think it is, 25 $29.5 million, which was the forecast year 2000 budget 26 for a system expansion, transmission system expansion. 27 Correct? 28 MR. CURTIS: No. I think we went through Les Services StenoTran Services Inc. 613-521-0703 567 OHNC Panel 1, cr-ex (Poch) 1 those items and not all of that $29.5 million was 2 directed towards system expansion. 3 MR. POCH: Right. In fact, that was the point 4 of Mr. Stephenson's cross-examination, to show that a 5 bunch of it was for inspection and some was for -- I 6 forget what other categories were included. 7 MR. CURTIS: That's correct, yes. 8 MR. POCH: They were all new spending as 9 opposed to maintenance, but they were addressed to 10 different aspects of the system. 11 MR. CURTIS: Yes, sir. That's correct. 12 MR. POCH: Now, I will leave the revelation 13 embedded in there in that you are spending my energy and 14 actions for my next cross-examination. Let me just ask 15 you this. 16 You would agree that we could go back over 17 several years, and you have had it, there has been a 18 pattern, it goes up and down and its focus changes, but 19 it costs money to build this system and it costs money 20 to maintain this system. 21 MR. CURTIS: That's correct. 22 MR. POCH: All right. And we could distil out 23 of this, and there would probably be as many 24 methodologies as there are people in this room, but we 25 could distil out of this a value for how much you spend 26 for every added peak megawatt that the transmission 27 system carries. 28 MR. CURTIS: We have tried for many years to Les Services StenoTran Services Inc. 613-521-0703 568 OHNC Panel 1, cr-ex (Poch) 1 try and derive that and we haven't been particularly 2 successful. 3 MR. POCH: And that's because, depending on 4 where you are in the province, there's bigger or smaller 5 numbers that you could fairly attribute. Correct? 6 MR. CURTIS: I think there are a number of 7 factors that cause this not to be an easy determination 8 to make. 9 MR. POCH: Let me put one to you. 10 MR. CURTIS: But it's one. 11 MR. POCH: And the lumpiness is a key factor. 12 MR. CURTIS: Lumpiness is another one, yes. 13 MR. POCH: That is you have got a big 14 investment this year, you might not have another big 15 investment for another five years. 16 MR. CURTIS: That's correct, yes. 17 MR. POCH: Whether 29.5 is right or there is 18 some other number, it's not an insignificant number when 19 over the course of many years, when you have many small 20 additions and the peak megawatt that the transmission 21 system has to carry goes up, you can expect that your 22 costs are going to go up. Isn't that fair? 23 MR. CURTIS: That there will be more 24 investment required, yes. That is correct. 25 MR. POCH: And you can't tell us if that 26 number if typical, low, high or what, can you, is what 27 you just told me a minute ago I believe. Is that 28 correct? Les Services StenoTran Services Inc. 613-521-0703 569 OHNC Panel 1, cr-ex (Poch) 1 MR. CURTIS: I don't think we are in a 2 position right now to be able to tell you, you know, 3 whether that figure, that $29.5 million, where that 4 falls in that spectrum, no. 5 MR. POCH: Is it possible for you to go back 6 and look at the last, say, 20 years and tell us what you 7 have actually spent on systems, on transmission systems? 8 MR. CURTIS: I don't know. No, I don't 9 believe so. We have tried that within our December 10 application. We were asked several times by different 11 intervenors to go back through Ontario Hydro's history 12 and provide a historical based tracking of our costs and 13 our expenditures. Unfortunately, with the way the 14 various recording systems have been put in place within 15 the company and the unbundling of the company of Ontario 16 Hydro, we haven't been able to do that. No. 17 MR. POCH: You just haven't kept the books in 18 that way. 19 MR. CURTIS: That might be an 20 oversimplification of what the issue is, but -- 21 MR. POCH: Remind me. What's the total rate 22 base at this time in the transmission utility? 23 MR. CURTIS: It's around $5.6 billion. 24 MR. POCH: $5.6 billion. 25 MR. CURTIS: Yes. 26 MR. POCH: And the peak megawatts? 27 MR. PORAY: About twenty-two and a half 28 thousand megawatts. Les Services StenoTran Services Inc. 613-521-0703 570 OHNC Panel 1, cr-ex (Poch) 1 MR. POCH: All right. I guess that's about as 2 accurate as we are going to get, is it? 3 MR. CURTIS: I think so, yes. 4 MR. POCH: All right. Now, we spoke a minute 5 ago about how lumpy this is. You don't wait until the 6 last minute before you added the next lumpy addition in 7 system planning. Whatever system load planning takes, 8 there is a smoothing that occurs in the planning as 9 well, is there not? 10 MR. CURTIS: Yes, there is. 11 MR. POCH: What's your lead time? In the old 12 world at least where you were responsible for 13 transmission planning, what's the lead time? How far 14 ahead do you like to look? 15 MR. PORAY: I think we -- in our 16 interrogatories, I think we have responded 10 to 15 17 years. 18 MR. POCH: Okay. Thank you. Okay. Moving on 19 to the question of the rate shift, rate impact. You 20 have offered a figure of 5 to 10 per cent is what you 21 view as would be a significant and preferably avoidable 22 rate impact. Correct? 23 MR. CURTIS: Yes. 24 MR. POCH: Now, that's 5 per cent of the 25 transmission component of the unbundled transmission 26 rate. 27 MR. CURTIS: That's correct, yes. 28 MR. POCH: And I think we have heard that Les Services StenoTran Services Inc. 613-521-0703 571 OHNC Panel 1, cr-ex (Poch) 1 transmission is roughly 15 per cent of what a customer 2 would expect in bundled rates. 3 MR. CURTIS: That's correct. 4 MR. POCH: So we are looking at a rate shift 5 of three quarters of a per cent on the overall bill, the 6 bundled bill. 7 MR. CURTIS: I trust your math. Yes. 8 MR. POCH: Well, 5 per cent times 15 per cent, 9 whatever it is. 10 MR. CURTIS: Yes. 11 MR. POCH: And that's on the one side that you 12 feel the constraint is. Just in terms of how 13 significant this is to embedded generation, have I got 14 the math right that if I wanted to understand that, if 15 an embedded generation could, say, avoid half of the 16 transmission charges for simplicity, similarly, then, 17 their related load customer would be looking at perhaps 18 a seven and a half per cent saving on the bundled bill. 19 Again, you multiply 50 per cent times 15 per cent. 20 MR. CURTIS: Yes. 21 MR. POCH: And you are talking about the load 22 customer that that generator serves. 23 MR. CURTIS: Yes, that's correct. 24 MR. POCH: All right. Now, when the gentlemen 25 from AMPCO were questioning you last week -- the 26 reference I have is in Volume 2, pages 238 and 239. I 27 don't think you need to turn it up. They were asking 28 you about the impacts on the directs and the rural Les Services StenoTran Services Inc. 613-521-0703 572 OHNC Panel 1, cr-ex (Poch) 1 retails due to the breakup of the power district. Do 2 you recall that? 3 MR. CURTIS: Yes. 4 MR. POCH: All right. You indicated that 5 while the numbers were higher, it was acceptable in your 6 view because what had to be looked at was the impact of 7 all of the changes that are occurring, not just the 8 breakup of the power district, but, for example, those 9 nice big negative numbers we have seen when we look at 10 the rate shift in favour of them, the generators and 11 directs. Correct? 12 MR. CURTIS: That's correct. Overall we feel 13 that all of the issues that we are talking about at this 14 hearing have to be incorporated in terms of viewing 15 whether or not there is a negative rate shift overall 16 for any customer group. 17 MR. POCH: But on Friday when Mr. Janigan for 18 VECC was asking questions about Exhibit D, Tab 5, 19 Schedule 2, I think it was page 6 which shows the rate 20 impact, he went down that list and it's 7 per cent and 21 5.2, and so on. 22 MR. CURTIS: Yes. 23 MR. POCH: And every time it was over 5 you 24 said that reached your principle about rate impact. Do 25 you recall that? 26 MR. CURTIS: Yes. 27 MR. POCH: But that list is about just one 28 element -- Les Services StenoTran Services Inc. 613-521-0703 573 OHNC Panel 1, cr-ex (Poch) 1 MR. CURTIS: That's correct. 2 MR. POCH: -- of rate impact, isn't it? 3 MR. CURTIS: Yes, that's correct. 4 MR. POCH: So if we are to keep with the 5 explanation you gave to AMPCO the day before -- 6 MR. CURTIS: Yes. 7 MR. POCH: -- we shouldn't be drawing that 8 conclusion just from that one number, should we? 9 MR. CURTIS: Not necessarily, no. 10 MR. POCH: And we have to combine with that 11 other impacts, both positive and negative, that those, 12 for example other LDCs, are going to feel as a result of 13 all the changes? 14 MR. CURTIS: That's correct. 15 MR. POCH: All right. 16 One such change is the fact that these other 17 LDCs are part of the group that are benefitting from the 18 breakup of the power district. Correct? 19 MR. PORAY: Well, the other LDCs also include 20 the Ontario Hydro LDCs which in fact doesn't benefit. 21 It goes the other way. 22 MR. POCH: Okay. Fair enough. The small 23 LDCs, the ones who are, I think you expressed on a 24 number of occasions, less likely to be able to put in 25 place embedded generation -- 26 MR. CURTIS: Yes. 27 MR. POCH: -- those ones are going to benefit 28 from the breakup of the power district? Les Services StenoTran Services Inc. 613-521-0703 574 OHNC Panel 1, cr-ex (Poch) 1 MR. PORAY: On average, yes. 2 MR. CURTIS: Yes. On average, yes. 3 MR. POCH: Yes, all right. 4 Just to get a sense of that, if we turn up 5 Exhibit D, Tab 4, Schedule 3, and my notes have it as 6 Table 4 -- this is page 6 of 13. 7 MR. PORAY: Yes, we have it. 8 MR. CURTIS: Yes. 9 MR. POCH: I was just looking at the numbers 10 here. Correct me if I'm wrong, but for the change in 11 the impact on that group -- maybe you can help us here. 12 I, on the back of the envelope, found that 13 that category is enjoying about a 3 per cent benefit 14 from the breakup of the power district. Can you help 15 me? Does that seem right? 16 MR. PORAY: You're talking about all the other 17 LDCs less the Ontario Hydro? 18 MR. POCH: Yes. 19 MR. PORAY: So this includes all of the LDCs 20 in the province? 21 If you in fact turn over to Table 5 of 22 Exhibit D, Tab 4, Schedule 3, page 8, you can see the 23 percentage changes there for all the customer groups. 24 MR. POCH: Right. Thank you. That is very 25 helpful. 26 I would be looking for the second row of 27 percentage numbers there? 28 MR. PORAY: That is correct. Les Services StenoTran Services Inc. 613-521-0703 575 OHNC Panel 1, cr-ex (Poch) 1 MR. POCH: They are in the range point 2 minus 4, minus 3, minus 6 per cent? 3 MR. PORAY: That's correct. 4 MR. POCH: In the various options. 5 If we look down to the bottom row, we can see 6 the small LDCs. Correct? 7 MR. PORAY: That's correct, yes. 8 MR. POCH: They are indeed up at minus 8, 9 minus 10, minus 9 per cent? 10 MR. PORAY: That's what it shows, yes. 11 MR. POCH: To get the overall impact of your 12 rate proposal, then, we need to combine that with the 13 figures that occur behind Tab 5, which were in the range 14 of 7 to 5, and so on? 15 MR. PORAY: That's correct. 16 MR. POCH: So in fact these smaller LDCs may 17 be enjoying overall a reduced rate from a number of your 18 proposals? 19 MR. PORAY: Yes. Yes. 20 MR. POCH: Including your net billing 21 proposals? 22 Well, we can just compare the figures. 23 --- Pause 24 MR. POCH: If we turn up, then, Tab 5, 25 Schedule 2, page 6, Table 5, in all but the first 26 scenario there, of the eight listed, for the small other 27 LDCs the benefit of breaking up the power district 28 overshadows the disbenefit of your net billing, the Les Services StenoTran Services Inc. 613-521-0703 576 OHNC Panel 1, cr-ex (Poch) 1 various net billing proposals given the forecast for 2 embedded generation. Correct? 3 MR. PORAY: The percentage certainly shows for 4 the evaluations that we have done, yes. 5 MR. POCH: Yes, all right. Even in the case 6 of the high forecast for embedded generation, in other 7 words not limiting it to cogeneration, and net billing 8 for both network and connection, the first one where you 9 have a 12.7 per cent impact, if we were to deduct from 10 that 10 per cent, 9 or 10 per cent that we see for the 11 impact on small with the power district breakup, we are 12 down below your 5 per cent significant impact. 13 MR. PORAY: Somewhere around there, yes. 14 MR. POCH: Again, that 5 per cent in turn of 15 the whole energy and transmission rate base would be 16 something like three-quarters of a per cent? 17 MR. CURTIS: I wouldn't want to stretch the 18 precision -- 19 MR. POCH: All right. 20 MR. CURTIS: -- in terms of being able to just 21 add percentages between these tables though, Mr. Poch. 22 MR. POCH: Fair enough. We are getting -- we 23 shouldn't have that many significant issues is what you 24 are telling me. 25 MR. CURTIS: I think so, yes. 26 MR. POCH: Now, other concerns with your rate 27 impact analysis. 28 We start off our discussions today talking Les Services StenoTran Services Inc. 613-521-0703 577 OHNC Panel 1, cr-ex (Poch) 1 about the fact that as the system grows there are 2 unevenly, not uniformly, lumpily perhaps, if you can 3 accept my language, costs that go up. 4 MR. CURTIS: Yes. Costs in terms of expanding 5 the system I guess you are referring to, yes. 6 MR. POCH: So embedded generation can, to some 7 extent, mitigate that? 8 MR. CURTIS: On a going forward basis, if you 9 are talking about -- 10 MR. POCH: Yes. 11 MR. CURTIS: -- new investment -- 12 MR. POCH: Correct. 13 MR. CURTIS: -- in the system, yes. 14 MR. POCH: Your impact assessment doesn't 15 include anything for that benefit which can be enjoyed 16 by the pool of all customers? 17 MR. CURTIS: The assessments that you have 18 been referring to have been in reference to existing 19 investment, so that is correct. We have other aspects 20 of our proposal to try to address new investment. 21 MR. POCH: What are you referring to? 22 MR. CURTIS: In terms of new load connections 23 and new generation connection. 24 MR. POCH: Fine. For the network component, 25 though -- 26 MR. CURTIS: Yes. 27 MR. POCH: -- you have nothing in there that 28 is addressing that particular question, do you? Les Services StenoTran Services Inc. 613-521-0703 578 OHNC Panel 1, cr-ex (Poch) 1 MR. CURTIS: No. In terms of our proposal, I 2 have put forward the position that as far as network is 3 concerned it's not devoted to specific individual 4 customers, either load customers or generation 5 customers. So it is very difficult to try to quantify 6 the types of benefits that you are talking about. 7 MR. POCH: Sure. I think I understand the 8 problem and all I'm suggesting, in some not terrible 9 easy way to quantify it we will grant, but I think you 10 have agreed embedded generation helps mitigate the cost 11 pressure for the new additions to the network. You 12 agreed to that. Correct? 13 MR. CURTIS: No. I think in our earlier 14 position what we stated is you would have to see what 15 happened in terms of this new embedded generation and 16 where it appeared on the system. It certainly could 17 appear on parts of the system that it would work the 18 other way around and in fact what you would have to do 19 would be to augment the network at that particular 20 point. 21 MR. POCH: Why would that be? 22 MR. CURTIS: If you are not putting the 23 embedded generation in areas that have a current heavy 24 load requirement, or you have over-installed, if you 25 will, embedded generation over and above what the local 26 load is, then you may have to have other investments in 27 the network facilities to carry back that additional 28 power away. Les Services StenoTran Services Inc. 613-521-0703 579 OHNC Panel 1, cr-ex (Poch) 1 MR. POCH: You are talking about where an 2 embedded generator is a net exporter from behind the 3 meter? 4 MR. CURTIS: That's correct, yes. 5 MR. POCH: In which case they are just like 6 any other generator coming on the system. They may face 7 generator connection charges? 8 MR. PORAY: I think what we are trying to 9 focus on here is the issue of network. We are not 10 dealing with connection. 11 MR. POCH: Okay. 12 MR. PORAY: What we are looking at is if there 13 is investment in new generation that may perhaps trigger 14 some additional network facilities, then that's the 15 issue that we haven't addressed in here. That is the 16 issue, really, that will be dealt under the new planning 17 process with the IMO. 18 MR. POCH: I want to understand some of the 19 basics here. As a general rule, if we have a lot of 20 embedded generation spread around the province, 21 particularly in load centres, that's going to reduce 22 pressure on the network to expand? 23 MR. PORAY: The way I would characterize that 24 is I would say that a generation is potential option to 25 new investment in transmission. 26 MR. POCH: Fair enough. Potential alternative 27 I think is -- 28 MR. PORAY: Alternative, sorry. Les Services StenoTran Services Inc. 613-521-0703 580 OHNC Panel 1, cr-ex (Poch) 1 MR. POCH: Fair enough. 2 All I was making was a simple point that you 3 haven't attempted to quantify that and that's a benefit 4 that would be borne by everybody who pays for the 5 network. Correct? I am going to ask you the preface 6 first, that's a benefit if it accrues -- it accrues to 7 everybody who helps pay for the network in the future? 8 To the extent that network is a pool of costs, 9 anybody who is paying for that pool would enjoy that 10 benefit? 11 MR. CURTIS: I think that's correct. 12 MR. POCH: All right. And you haven't 13 attempted to quantify that and you haven't included that 14 in your rate shift impact analysis? 15 MR. PORAY: No, we have not. 16 MR. CURTIS: Again, what we are dealing with 17 is existing assets in terms of these, so it wouldn't 18 have been appropriate to deal with that. 19 MR. POCH: I understand that. I just want to 20 make it clear what's not included because if we want to 21 look at this overall picture, both now and in the 22 future, we would have to consider these factors, would 23 we not? 24 MR. CURTIS: Again, in terms of the proposal 25 we have put forward in what we are referencing here 26 under Tab 5 is specifically for existing assets. 27 MR. POCH: I understand that and, in fact, 28 that's what we started with. Les Services StenoTran Services Inc. 613-521-0703 581 OHNC Panel 1, cr-ex (Poch) 1 MR. ROGERS: Excuse me, excuse me. 2 Mr. Chairman, could I ask my friend to allow the 3 witnesses to complete their answer before interjecting? 4 MR. POCH: I apologize. I have done that a 5 couple of times. I apologize. Go ahead. 6 MR. CURTIS: Okay. What we have talked about 7 under Tab 5 here is existing assets and we have not, as 8 you quite rightly put forward, looked at new investment 9 going forward specifically in that detail, but I think 10 it would be a mistake to try and mix the two because 11 then you run the risk of trying to incorporate the 12 factors that are going to appear in the new marketplace 13 and their influence on recovery for existing assets. 14 MR. POCH: Let's be clear, I am not talking 15 about the energy commodity markets now. We are just 16 looking at transmission costs in the future. 17 MR. CURTIS: I am as well. 18 MR. POCH: All right. 19 I think we were very clear -- Dr. Poray was 20 very clear when he said your whole rate application has 21 been guided by focusing on the existing costs, as 22 opposed to this forward looking price signal, so I am 23 not suggesting there is any inconsistency in your 24 approach. I just want to sketch out what we would want 25 to include if we did want to consider those factors. 26 Can we agree to that, so we don't have to have the same 27 caveat each time? 28 MR. CURTIS: All right. Les Services StenoTran Services Inc. 613-521-0703 582 OHNC Panel 1, cr-ex (Poch) 1 MR. POCH: And annexed on that list would be 2 that not simply -- there are costs that the transmission 3 system faces that aren't simply those associated with 4 peak capacity. Correct? Let me give you some examples. 5 The number and duration of high loads can affect the 6 useful life of transformers? 7 MR. CURTIS: Yes. 8 MR. POCH: And high loads obviously increase 9 line losses? It's a commodity related cost? 10 MR. CURTIS: On the commodity side that's 11 correct. 12 MR. POCH: Right. But you can help me with 13 the transmission aspect of that, that line losses are 14 not linear. There is, I don't know if it's a square or 15 a cube law. Correct? 16 MR. CURTIS: It's a square. Yes. 17 MR. POCH: A square law, okay. So that 18 marginal line losses or marginal load suffers 19 significantly on any given line, significantly more line 20 loss than the load underneath it? It goes up with the 21 square of the load on the line? 22 MR. CURTIS: Yes. 23 MR. POCH: Of course, in keeping with what you 24 said, that's not included in your impact assessment? 25 MR. CURTIS: No, of course not because it is a 26 commodity related charge. 27 MR. POCH: Fair enough. 28 MR. PORAY: It's not only the fact that it's a Les Services StenoTran Services Inc. 613-521-0703 583 OHNC Panel 1, cr-ex (Poch) 1 commodity related charge. It really is dependent on how 2 the system is operated and dispatched -- in other words, 3 what generation meets what load and we don't perform 4 that function. 5 MR. POCH: Fair enough. Just in the bigger 6 scheme of things, line losses are going to be part of 7 the IMOs uplift charge? 8 MR. PORAY: Initially, yes. 9 MR. POCH: So at least initially they are just 10 going to get spread out. Your expectation is they are 11 just going to get spread out as a standard uplift per 12 kilowatt hour of energy everyone on the system will 13 face? 14 MR. PORAY: That is my understanding, yes. 15 MR. POCH: So to the extent that embedded 16 generation unloads lines and saves on losses, everyone 17 will enjoy that. Everyone who takes energy will enjoy 18 that. 19 MR. PORAY: There could be a benefit to the 20 system as a whole, yes. 21 MR. POCH: Now, there has been some question 22 as to whether or not we can assume that any freed up 23 transmission capacity, freed up due to embedded 24 generation, could be utilized. Can we agree that to the 25 extent that the EWT export and wheel through activities 26 increase they may in a sense in that rebalancing of 27 where energy is being used and generated and going, they 28 may well take up that slack? Les Services StenoTran Services Inc. 613-521-0703 584 OHNC Panel 1, cr-ex (Poch) 1 MR. CURTIS: No, I don't think we could 2 necessarily agree to that. You are maybe talking about 3 the utilization of the interconnection facilities, 4 but -- 5 MR. POCH: Broadly over the network? 6 MR. CURTIS: Broadly over the network, no, I 7 don't think we could agree to that. 8 MR. POCH: Would you agree that to the extent 9 that we have more embedded generation, then Mr. 10 Campbell's client is going to have more generation on 11 his hands he is going to be trying to look for a market 12 for perhaps outside the province. Fair? 13 MR. CURTIS: If you are talking about an 14 overall net increase in the exports that might result 15 out of this, then there could be some benefits to the 16 network. 17 MR. POCH: Right. And they rely on the 18 network to move their energy? 19 MR. CURTIS: Yes, that's correct. 20 MR. POCH: Now, your revenues may not be 21 whole, given the proposal, but the amount of power 22 moving on the system is going to on the one hand be 23 decreased by the embedded generation and it could be 24 increased to some extent by increases in EWT? 25 MR. PORAY: I think from an overall 26 perspective, yes, that's a fair assumption. 27 MR. POCH: Needless to say there's nothing in 28 your rate impact assessment about that. Les Services StenoTran Services Inc. 613-521-0703 585 OHNC Panel 1, cr-ex (Poch) 1 Now, a fourth suggestion has been made about 2 the broader impacts on the overall cost of energy 3 services to various customers due to embedded generation 4 and that is that it may reduce energy prices. Can we 5 agree that any reduction in demand or increase in supply 6 will tend to lower the equilibrium market price, that's 7 sort of Economics 101. 8 MR. CURTIS: On the basis of Economics 101, 9 yes, I think you could say that. 10 MR. POCH: At that altitude we can agree? 11 MR. CURTIS: Yes. 12 MR. POCH: Fair enough. 13 Finally, the rate impact assessment is in 14 nominal dollars. Correct? 15 MR. CURTIS: Yes, it is. 16 MR. POCH: And if it was in real dollars it 17 would be lowered to the extent of inflation? 18 MR. PORAY: I think that's correct. 19 MR. CURTIS: There is the issue, though, of 20 what the appropriate escalators would be in this as 21 well. 22 MR. POCH: Sure. We can avoid debating the 23 escalators if we keep it in nominal is what you are 24 saying? 25 MR. CURTIS: That's correct. 26 MR. POCH: For that we are grateful. 27 I am trying to understand how you have gone 28 about this balancing. You have suggested this 5 per Les Services StenoTran Services Inc. 613-521-0703 586 OHNC Panel 1, cr-ex (Poch) 1 cent rate impact. I suggested some changes we might 2 want to look at determining when we have hit the 5 per 3 cent, but leaving that aside for the moment, even within 4 the confines of your Exhibit D, Tab 5, Schedule 2, Table 5 5 analysis, it seems to me you could have gone farther 6 than you did in favour of net billing without tripping 7 over your 5 per cent. I am thinking particularly you 8 could have gone for 4A, giving cogeneration the full 9 benefit of net billing, rather than grossing him up 50 10 per cent and you would be at 3.1 per cent. I am 11 wondering why you didn't go that way? 12 MR. CURTIS: I think we have talked about the 13 5 per cent in terms of price increases. I think there 14 was a sense that we had that other customers had 15 experienced a price decrease. It might reach the level 16 that customers would feel that that was unfair that they 17 got such a price decrease and -- 18 MR. POCH: So did you look -- 19 MR. ROGERS: Excuse me, let the witness finish 20 please. 21 MR. CURTIS: So there is the influence of the 22 price decreases in the other two columns in terms of our 23 valuation. 24 MR. POCH: Right. 25 Again, looking at those other two columns, our 26 conversation earlier about the impact of the power 27 district break up, you would have to add to those 28 negative numbers the positive numbers that I am sure Les Services StenoTran Services Inc. 613-521-0703 587 OHNC Panel 1, cr-ex (Poch) 1 Mr. Snelson has gone over with you or will again. 2 MR. CURTIS: Yes. 3 MR. POCH: Which were not insignificant, I 4 take it? 5 MR. CURTIS: Yes, that's correct, yes. 6 MR. POCH: Now, we have tended to focus on 7 that second column, other LDCs, which you, I think, said 8 the presumption is there that smaller LDCs will be less 9 likely to have embedded generation? 10 MR. CURTIS: That's correct, yes. 11 MR. POCH: Can we agree that by the time the 12 market opens, based on the number of conversations your 13 organization is having with small LDCs, a great many of 14 them -- there is certainly a potential for a great many 15 of them to be merged with OHNC distribution? 16 MR. CURTIS: I am not sure that I can say 17 that. I am not part of that. 18 MR. POCH: Well, given that this is a 19 critical -- you have put this forward as a critical 20 aspect of your proposal, this rate impact analysis, and 21 we have all focused on this category, perhaps you will 22 excuse me for asking, how many MEUs are you having 23 conversations with about the potential for them to be 24 bought out or merged by you? 25 MR. CURTIS: I don't know. 26 MR. POCH: Are we talking about dozens? 27 MR. CURTIS: I don't know. 28 MR. POCH: Could we have an undertaking to Les Services StenoTran Services Inc. 613-521-0703 588 OHNC Panel 1, cr-ex (Poch) 1 find that out? 2 MR. ROGERS: Do you have one? No, you don't. 3 MR. POCH: I am asking for one. 4 MR. ROGERS: I don't know whether that can 5 be -- I am not sure, our discussions with them? 6 MR. POCH: I appreciate that we can't -- that 7 none of them have closed yet and it is only in the 8 discussion phase and so that is the only number we could 9 possibly get. 10 I am asking for it on an anonymous basis. No, 11 we don't need to know any names of any MEUs. I just 12 want to know how many of them, OHNC or your parent 13 company is having discussions with about potentially 14 joining your distribution entity. 15 MR. ROGERS: Can I just take this under 16 advisement, Mr. Chairman? 17 I don't know about the sensitivity here. I 18 don't know how you would define a discussion. Does that 19 mean that one person from Hydro Networks talked to 20 somebody from a local utility over coffee about it? I 21 mean, let me make some inquiries. Maybe I can report 22 back to the Board tomorrow morning. If there are some 23 serious discussions about certain of it maybe we can 24 give some information. I would like to take some 25 advice. 26 MR. POCH: I would be content if we can define 27 it at those entities where there has been a meeting or 28 correspondence on the topic. Les Services StenoTran Services Inc. 613-521-0703 589 OHNC Panel 1, cr-ex (Poch) 1 THE PRESIDING MEMBER: There are several 2 applications. 3 MR. ROGERS: That may be a way to do it. 4 THE PRESIDING MEMBER: Beyond that there is 5 not much else, really. I would suggest that you take an 6 undertaking and come back to it tomorrow. 7 Okay, Mike. 8 MR. LYLE: That will be Undertaking F4.1. 9 UNDERTAKING NO. F4.1: Mr. Curtis 10 undertakes to indicate how many MEUs OHNC 11 or it's parent company has corresponded 12 or met with concerning a potential merge 13 with the distribution entity 14 MR. POCH: Thank you. 15 Now, Mr. Curtis, I am sure you will agree that 16 OHNC is a big, sophisticated organization and they would 17 be fully capable of taking advantage of opportunities 18 for embedded generation, they and many of their 19 customers? 20 MR. CURTIS: We are precluded from installing 21 generation -- 22 MR. POCH: My apologies. 23 MR. CURTIS: -- by the provisions of the 24 legislation. 25 MR. POCH: I didn't mean to imply that. I 26 meant you are going -- you are a big entity. You are 27 going to have a number of customers within your boundary 28 that would be able to take advantage of this? Les Services StenoTran Services Inc. 613-521-0703 590 OHNC Panel 1, cr-ex (Poch) 1 MR. CURTIS: The individual customers may, 2 yes. 3 MR. POCH: Yes. 4 Now, just moving on from that rate impact 5 question for a minute. I noticed in your -- the RFP 6 document that is attached to the AGRA Monenco study -- I 7 apologize. I don't have the exhibit number. I don't 8 think you need it. 9 It was just there was mention of a concern 10 having been expressed about uneconomic generation. You 11 passed this along to recipients of the RFP as something 12 they needed to think about, correct? Can we consult 13 that? 14 MR. CURTIS: Sure, absolutely. 15 MR. POCH: I think we can find it for you. I 16 believe it was behind Tab 5. 17 MR. PORAY: Yes. It is Appendix A of the AGRA 18 Monenco report. 19 MR. POCH: Yes, I have it at -- 20 MR. PORAY: Which is Exhibit D, Tab 5, 21 Schedule 3. 22 MR. POCH: At page 2 thereof, in the 23 second paragraph on that page -- I can read it in for 24 those who don't have it in front of them: 25 "However, OHSC also recognizes that 26 barring commercially sound rate 27 structures for the collection of 28 transmission and distribution revenue Les Services StenoTran Services Inc. 613-521-0703 591 OHNC Panel 1, cr-ex (Poch) 1 requirements, there may be a substantial 2 incentive for the market participants to 3 bypass the sunk costs of transmission and 4 distribution by installing new 5 distributed generation that may otherwise 6 be uneconomic from societal 7 considerations." (As read) 8 MR. PORAY: That is what it says there, yes. 9 MR. POCH: All right. 10 First of all, can we agree that if we did this 11 forward-looking analysis of what embedded generation 12 does and found that it reduces, to some extent, future 13 costs of the network -- that is, there was a positive 14 avoided cost for network transmission -- then you 15 wouldn't necessarily conclude that generation is 16 uneconomic just because it costs a bit more than OPGI 17 generation does that needs to use the transmission grid. 18 Correct? 19 MR. CURTIS: Just to clarify the context of 20 what you are putting forward here, Mr. Poch, you are 21 talking again about avoiding future investments in the 22 transmission system -- 23 MR. POCH: That's correct. 24 MR. CURTIS: -- future expansion investments. 25 MR. POCH: That's correct. 26 MR. CURTIS: Not talking about the existing 27 infrastructure? 28 MR. POCH: Right. Les Services StenoTran Services Inc. 613-521-0703 592 OHNC Panel 1, cr-ex (Poch) 1 MR. CURTIS: Just to be clear, what we are 2 trying to refer to here in the RFP was the avoidance of 3 existing infrastructure. 4 MR. POCH: Fair enough. But let's just pause 5 at this, a generator, a proposed embedded generator -- 6 let's assume that OPGI's power is going for 3.8 cents on 7 average. Someone made that projection a couple of years 8 ago. Who knows what it will be, but let's say 3.8 9 per cent a kilowatt hour and one of IPPSO's members has 10 a plant that they can -- a cogenerator they can run and 11 it will run at 4.2 cents. 12 We can't conclude just from that it is 13 uneconomic unless we know what it's impact is on 14 transmission costs, correct, and other benefits that it 15 might bring? If it turns out it can save a transmission 16 upgrade that works out to be half a cent a kilowatt hour 17 for the number of, for the power it is generating, 18 decidedly it is economic to go ahead, is it not? 19 MR. CURTIS: What you are positing again here 20 is new load appears, what is the best way to address 21 that new load, supplying that new load? One option 22 would be a transmission alternative and another option 23 might be an embedded generation alternative. 24 In terms of doing the analysis overall, yes, 25 you would want to take into account all of those 26 factors. But again, you are looking forward at new load 27 appearing and the infrastructure that would have to be 28 put in place to service that new load. Les Services StenoTran Services Inc. 613-521-0703 593 OHNC Panel 1, cr-ex (Poch) 1 MR. POCH: Whoever is responsible for 2 transmission planning in the brave new world, we are not 3 going to be going through that kind of analysis, are we? 4 We are not going to be sitting down and planning the 5 system the way that Ontario Hydro used to? 6 MR. CURTIS: That's correct, yes. 7 MR. POCH: Embedded generation is going to 8 materialize or not, depending on the price signals it 9 faces? 10 MR. CURTIS: That is correct, yes. 11 MR. POCH: Now, this concern about uneconomic 12 generations, strictly speaking, this is in the realm 13 from if we all put on our transmission utility 14 blinkers -- and I am not using the term pejoratively, we 15 are here dealing with a transmission application -- 16 strictly speaking, that is an impact outside of that 17 field of vision. It is a societal cost or benefit 18 having to do with investment being economical or 19 economic in commodity generation. Correct? 20 MR. CURTIS: That's correct, yes. 21 MR. POCH: All right. 22 If we are going to take this societal 23 perspective, would you agree that another societal 24 element is that embedded generation is likely to be 25 cleaner generation? Certainly cogeneration is likely to 26 be? The more efficient it is, the likely to be cleaner 27 generation? 28 MR. CURTIS: I am not sure we are the most Les Services StenoTran Services Inc. 613-521-0703 594 OHNC Panel 1, cr-ex (Poch) 1 knowledgeable people to ask about this, but I would say, 2 broadly speaking, it would seem that is the case, yes. 3 MR. POCH: You would agree that one of the key 4 purposes of restructuring is -- one of the stated 5 objectives of restructuring -- is to move towards 6 cleaner generation? 7 MR. CURTIS: Those were one of the principles 8 that were stated in the Act, yes. 9 MR. POCH: Thank you. I have just a few other 10 questions on some of the practical considerations 11 associated with gross billing. I just note in passing, 12 Dr. Bonbright says we should pay good attention to 13 practical problems. 14 This discussion, this whole discussion, with 15 Amoco and Imperial and others about LRER if went for net 16 billing that problem disappears, correct? 17 MR. CURTIS: I am not sure we can speak on 18 behalf of those companies, but it would seem to go a 19 long way towards addressing that, yes. 20 MR. POCH: If you have any degree of gross up, 21 50 per cent or otherwise, you have to engage in 22 monitoring, metering monitoring and making arrangements 23 to determine what is a new load and what is not, what is 24 new generation and what is not, correct? 25 MR. CURTIS: Yes. 26 MR. POCH: There is an administrative cost to 27 that? 28 MR. CURTIS: Yes. Les Services StenoTran Services Inc. 613-521-0703 595 OHNC Panel 1, cr-ex (Poch) 1 MR. POCH: I take it you have no estimate of 2 what is involved in that? 3 MR. CURTIS: No precise estimate. But the 4 sense is that that is relatively small since most of 5 this information is being collected anyway. 6 MR. POCH: Let me just clarify. 7 I believe your proposal is that if you have 8 simultaneous addition of new load and new embedded 9 generation, to the extent that the new embedded 10 generation doesn't exceed the new load, that is going to 11 be dealt with as net, net net? 12 MR. CURTIS: It is dealt with separately as a 13 new load addition and a new generation investment, and 14 it is as per our application, yes. 15 MR. POCH: Right. It's not going to be 16 grossed up. 17 MR. CURTIS: That's correct. Right. 18 MR. POCH: You have qualified that with the 19 phrase "simultaneous", and I wanted to ask about that. 20 If the new embedded generation slightly 21 preceded the new load, do I now understand that as the 22 new load comes on less and less of the embedded 23 generation, new embedded generation, would be grossed 24 up? 25 MR. CURTIS: I would just like to clarify 26 something. 27 You said that we said the simultaneous 28 addition of load? Les Services StenoTran Services Inc. 613-521-0703 596 OHNC Panel 1, cr-ex (Poch) 1 MR. POCH: I thought I had -- 2 MR. CURTIS: I thought that was your example 3 that you cited to us a minute ago. I'm not aware in our 4 submission where we were talking about it simultaneously 5 occurring. 6 MR. POCH: I don't have the cite here. I took 7 your -- 8 MR. CURTIS: It would be pretty rare that you 9 would have an exact amount of load being added to the 10 system and a precisely matching amount of new generation 11 being added to the system. 12 MR. POCH: Correct my understanding if I'm 13 wrong. I took it from earlier conversations and from 14 your filing that if a new industry comes, sets up shop 15 in Ontario, it includes embedded generation, it is only 16 going to face transmission charges for its -- I hate to 17 use the phrase -- net load that the meter sees. You are 18 not going to gross up its embedded generation. 19 MR. CURTIS: That's correct. 20 MR. PORAY: That's correct. 21 MR. POCH: Okay. So there we have what I call 22 using the phrase "simultaneous". 23 If a plant arrives, it's just new load, it's 24 obviously going to face transmission charges. 25 MR. CURTIS: That's correct, yes. 26 MR. POCH: And then -- 27 MR. CURTIS: Unless -- 28 MR. POCH: Go ahead. Les Services StenoTran Services Inc. 613-521-0703 597 OHNC Panel 1, cr-ex (Poch) 1 MR. CURTIS: We have talked about new load 2 coming on, being able to make the choice in terms of how 3 the investment occurred, which of course then will 4 affect what transmission rates it is actually charged 5 for -- and I'm making the distinction between connection 6 and network here. 7 MR. POCH: Yes. I was thinking of network 8 here, just to keep it simple. 9 MR. CURTIS: Okay. 10 MR. POCH: So a company comes, it is a new 11 load, obviously it faces network transmission charges. 12 Correct? 13 MR. CURTIS: Yes, that's correct. 14 MR. POCH: It then adds an embedded generation 15 generator. 16 MR. CURTIS: Yes. 17 MR. POCH: That embedded generation is going 18 to be grossed -- it is going to face gross billing for 19 the load reduced by that embedded generation. 20 MR. CURTIS: Yes. 21 MR. POCH: And that is because they aren't 22 done simultaneously. 23 MR. CURTIS: Well, they are treated as 24 happening at two different points in time, and the 25 reason for that is that facilities would have had to 26 have been made available for that load on the 27 transmission side, correct. 28 MR. POCH: Certainly the connection -- Les Services StenoTran Services Inc. 613-521-0703 598 OHNC Panel 1, cr-ex (Poch) 1 MR. CURTIS: Yes. 2 MR. POCH: I was trying to stick with network, 3 just if I can interrupt you. 4 MR. ROGERS: Mr. Curtis, had you finished? 5 MR. POCH: I just wanted to make that 6 distinction that facilities would have had to have been 7 put in place, arrangements would have had to have been 8 put in place for that new load and so it would be 9 charged therefore on that basis, and that is the 10 rationale for it. 11 MR. POCH: I understand that would be the case 12 with connection. I thought we were talking about 13 network. That is why I was interrupting. 14 On the network side, just for the network 15 charges, you would agree with the conclusion I drew, 16 that it would face gross load billing? 17 MR. CURTIS: That's correct, yes. 18 MR. POCH: All right. 19 Now, an existing company, then, realizes it is 20 a candidate for cogeneration and will face gross billing 21 if it puts it on its existing plant, but if it chose 22 instead to build a new plant it could be in fact coming 23 under this policy of simultaneous addition of load and 24 generation and be net billed. Correct? 25 MR. CURTIS: Yes, that's correct. But, again, 26 the rationale for it is because if the load appears 27 first then arrangements have to be made not only on the 28 connection side but also on the network side in terms of Les Services StenoTran Services Inc. 613-521-0703 599 OHNC Panel 1, cr-ex (Poch) 1 supplying that load. So that dictates the basis for the 2 treatment. 3 MR. POCH: I understand that concern that you 4 have expressed. Is that true of network facilities as 5 well? 6 MR. CURTIS: Well, the network is there to 7 service that load and -- 8 MR. POCH: Go ahead. 9 MR. CURTIS: So if that load appears, the 10 network has to be there and available to supply that 11 load. 12 MR. POCH: So, in other words, serving new 13 load, it puts pressure on the network system for 14 expansion, and you are smoothing that out and assuming 15 that every additional megawatt is an additional burden 16 on the network system that you will have already 17 responded to. 18 MR. CURTIS: That's correct, yes. 19 MR. POCH: Is there not a concern that you 20 may -- that some companies may well follow that cue and 21 in some cases they may shut down an old plant and build 22 a new one to take -- because this is the make or break 23 7 cents, and you could be stranding some private 24 investment in the old plant? 25 MR. CURTIS: It is possible, yes. 26 MR. POCH: Now, what if we have a new entity 27 that comes -- let's call it, you know, Falconbridge -- 28 any relation to the existing company is purely Les Services StenoTran Services Inc. 613-521-0703 600 OHNC Panel 1, cr-ex (Poch) 1 coincidence, I assure you -- Falconbridge Shaft Power 2 and Light Company, and it provides energy services to 3 shelters. It is a new company that does cogeneration. 4 This new company is a load you have not faced before and 5 it is an embedded generator you have not seen before. 6 It would qualify under what -- as we have just spoken, 7 for net billing. Correct? 8 MR. CURTIS: Just to clarify, this company 9 that you are talking about has new load that is 10 appearing and it is -- is it installing generation? 11 MR. POCH: It is putting in embedded 12 generation and it is in the business of selling lumens 13 and torque. It doesn't sell electricity. 14 MR. CURTIS: I guess I'm not picking up on 15 this distinction that you are making. We are talking 16 about a new load appearing and a new generator to serve 17 that load? 18 MR. POCH: Yes. 19 MR. CURTIS: So it is the same examples, then, 20 that you have talked about before -- 21 MR. POCH: It's net. 22 MR. CURTIS: -- that it would be net load 23 billing, yes. 24 MR. POCH: It not in the business of reselling 25 electricity but in the business of selling shaft power 26 and lumens, may well sell that shaft power and lumens to 27 another entity, say, Falconbridge Smelting, and lower 28 your load on the system. Les Services StenoTran Services Inc. 613-521-0703 601 OHNC Panel 1, cr-ex (Poch) 1 MR. CURTIS: Yes, I -- 2 MR. POCH: It would be circumventing your 3 policy, would it not? 4 MR. CURTIS: I guess I'm not seeing that 5 distinction about what it is selling from a transmission 6 perspective. It is selling power, if you will, to serve 7 that new load that appeared. 8 MR. POCH: Well, I'm suggesting to you that 9 the ultimate purpose to which the shaft power and lumens 10 are used is the same smelting of the same nickel that 11 was previously being done with your electricity. 12 MR. CURTIS: I guess I'm not sure I could see 13 how that would be done because this new load appeared, 14 you have a new generator that appeared, and there would 15 be specific physical connections between that generator 16 and the new load. Then to go on and say that this new 17 generation in fact is servicing an old load, I'm finding 18 that difficult to understand. 19 MR. POCH: I'm just suggesting to you that 20 once we get into this question of monitoring what the 21 electricity is being used for and if it is new and it is 22 old, isn't it open to, you know, all the Philadelphia 23 lawyers amongst us to come up with some other version of 24 the little scheme I just suggested, some clever little 25 way, through corporate restructuring, to qualify it as a 26 new load and a new generator when they want to build a 27 new embedded generator, even though in fact, you know, 28 in the real world, the same metal is getting smelted? Les Services StenoTran Services Inc. 613-521-0703 602 OHNC Panel 1, cr-ex (Poch) 1 MR. CURTIS: No. We -- 2 MR. POCH: Isn't that a concern? 3 MR. CURTIS: No. We don't believe that is the 4 case. 5 In the example that you are talking about, 6 there will be a meter that will meter this load that the 7 new load is taking off the existing transmission system 8 and there will be a meter on the generator supplying 9 this load, and the billing structure will be based on 10 those two meter readings. 11 MR. POCH: My point is this. I will get to 12 the quick here. If an existing plant puts in embedded 13 generation, you are going to see that, you are going to 14 gross it up for the embedded generation, but if it says 15 "No, that's not the old load I'm serving, I'm serving a 16 new load because I have created a new corporate entity 17 that's using that load", they might be able to argue 18 that this is simultaneous new load and generation in B, 19 net bill. 20 MR. CURTIS: No. I don't believe that. 21 MR. POCH: All right. How are you going to 22 police that? 23 MR. CURTIS: Well, again, it's done through 24 the actual meter readings of the load in terms of taking 25 services off the transmission system and the load that's 26 supplied by the embedded generator. 27 MR. POCH: I think it becomes a legal question 28 of whether they will be able to dodge your tariff, but Les Services StenoTran Services Inc. 613-521-0703 603 OHNC Panel 1, cr-ex (Poch) 1 let's leave it at that. Now, there was some 2 conversation, I will try not to be too repetitious here, 3 about what's the difference between embedded generation 4 and the plant shutting down or the plant engaging in 5 conservation. 6 I understood the distinction between the one 7 shutting down and embedded generation is one of intent. 8 One's intending to generate and avoid transmission, the 9 other is a victim of circumstances. 10 MR. CURTIS: That's correct, yes. 11 MR. POCH: And as between embedded generation 12 and conservation, can we agree that in most ways the 13 impact on the transmission system of diversified 14 relatively small and efficient embedded generation is 15 similar to conservation? 16 MR. CURTIS: There are differences. Even with 17 the small embedded generators that appear on the system, 18 it's the same situation as for larger embedded 19 generations that appear on the system. Once they are 20 out of service for any period of time due to maintenance 21 or outages, that load, that existing load, has to be 22 serviced through the transmission system. 23 MR. POCH: You would agree that if it's many 24 small generators, that's a different picture from the 25 transmission operation side than a very large generator 26 that goes down. 27 MR. CURTIS: I don't think in the context that 28 you are talking about though that there's that much Les Services StenoTran Services Inc. 613-521-0703 604 OHNC Panel 1, cr-ex (Poch) 1 difference because you are talking about small 2 generators that are widely dispersed around the 3 province, so if a local small generator goes down, that 4 load in that local area still has to be supplied through 5 the transmission system, even if it's supplied -- I 6 think what you were leading to was even if it was 7 supplied by the other small embedded generators that are 8 still up and running, but they are in a different 9 location in the province. 10 MR. POCH: I wasn't thinking of connection or 11 distribution related costs. I'm talking about the 12 network. You have a great many five megawatt 13 cogenerators. Your network doesn't have to be big 14 enough to handle the contingency of them all going down 15 at once. 16 MR. CURTIS: That is correct. 17 MR. POCH: I['m just reading from Mr. 18 Chernick's evidence, it's footnote 15 at page 13 of 19 Exhibit H5.1, and he says, and let me see if you agree: 20 "The probability of 80 units with 10 per 21 cent independent outage rates all being 22 out of service simultaneously is ten to 23 the minus eightieth." 24 Dr. Poray, does that math sound right? 25 MR. PORAY: Do you need this? 26 MR. ROGERS: I think Mr. Poray would like to 27 look at the document to be sure it's in context. 28 MR. PORAY: What page? Les Services StenoTran Services Inc. 613-521-0703 605 OHNC Panel 1, cr-ex (Poch) 1 MR. POCH: Page 13 of H5.1. 2 MR. PORAY: We agree it's a very small 3 probability. 4 MR. POCH: Put it this way. It's considerably 5 less than one second in the life of the universe. Are 6 we talking about the same order of magnitude here? 7 MR. PORAY: I'm not sure we are in the same 8 universe or the same planet now, but anyway -- 9 MR. CURTIS: I should point out that once one 10 of these small generators goes out, the load that it was 11 serving has to be served through the transmission system 12 from other generators, which may also involve the use of 13 the network. 14 MR. POCH: Fair enough. My point is with 80 15 of them, even though they are all each five megawatts, 16 the whole network might have to be beefed up to the tune 17 of five megawatts as opposed to with one, you know, 800 18 megawatt plant. The network would have to have 19 considerably more resiliency built into it. 20 MR. CURTIS: I think in general that's 21 correct, yes. 22 MR. POCH: Fine. 23 THE PRESIDING MEMBER: Mr. Poch, we would like 24 to take the morning break. So we will come back at 20 25 minutes after 11. 26 MR. POCH: I'm on the final item, 27 Mr. Chairman. 28 --- Upon recessing at 1105 Les Services StenoTran Services Inc. 613-521-0703 606 OHNC Panel 1, cr-ex (Poch) 1 --- Upon resuming at 1125 2 THE PRESIDING MEMBER: Okay, Mr. Poch, if you 3 would like to resume. 4 MR. POCH: Thank you, Mr. Chairman. 5 Gentlemen, when we left off, we were just 6 contrasting the achievement of embedded generation with 7 that of conservation. I take it you are not attempting 8 to try to levy your gross-ups on conservation on some 9 theory that it's decidedly uneconomic if it costs more 10 than 3.8 cents, for example. 11 MR. CURTIS: I don't think we were trying to 12 address any costs that were associated strictly with 13 conservation. No. 14 MR. POCH: You are not trying to ask new 15 conservation users to pick up some of the embedded 16 transmission costs. I'm a little confused as to how you 17 try and characterize that though. Existing load shrinks 18 with the new conservation measure. You are not going to 19 gross bill it for that. 20 MR. CURTIS: That is correct. 21 MR. POCH: All right. Is that in part, that 22 distinction, in part because of the societal benefits 23 that come from conservation? 24 MR. CURTIS: It wasn't in our assessment, no. 25 It was based on the fact that if you do put in 26 conservation measures, then you are offloading the 27 transmission system. In our view, there wouldn't be 28 that situation where the load would suddenly Les Services StenoTran Services Inc. 613-521-0703 607 OHNC Panel 1, cr-ex (Poch) 1 rematerialize back on to the transmission system due to 2 an outage of a generator, for example. 3 MR. POCH: All right. So then looking at that 4 cost that remains on the system with an embedded 5 generator when it has an outage, is that not in part 6 what you are trying to address in the charge determinant 7 debate, that is that a broader charge determinant will 8 end up creating charges for embedded generators to the 9 extent that they are online anywhere in that more 10 broadly defined peak? 11 MR. CURTIS: It wasn't aimed at addressing the 12 outages that generators normally take, for example, from 13 maintenance for that. It was aimed at this issue of 14 gaming that a load customer might engage in to try and 15 chase a peak and avoid transmission charges through that 16 mechanism. 17 MR. POCH: For an embedded generator, there's 18 two kinds of outages for simplicity. There's a planned 19 maintenance outage which we assume they are going to 20 take off peak. Correct? 21 MR. CURTIS: I think that's a fair assumption. 22 MR. POCH: And you are not going to have to 23 build any network facilities to deal with that to the 24 extent it happens off peak. 25 MR. CURTIS: Well, the issue that you are 26 talking about there is whether or not it's going to be a 27 participant in the IMO marketplace so that there can be 28 some coordination of that unit's outage with the rest of Les Services StenoTran Services Inc. 613-521-0703 608 OHNC Panel 1, cr-ex (Poch) 1 the system. If it's not a participant, then I don't 2 think that we could automatically assume that they will 3 take their outage at an off-peak period. 4 MR. POCH: They are going to face a 5 transmission charge if they take it in the non-peak 6 period. 7 MR. CURTIS: Yes. 8 MR. POCH: All right. So this will be an 9 incentive for them to do it off peak and if they are 10 rational -- 99 per cent of them are going to be 11 rational. Do you agree with that? 12 MR. CURTIS: If we use the rational behaviour 13 as the test, then I think we can agree with that. 14 MR. POCH: I don't know if you are proposing 15 otherwise. So what we are talking about in the main 16 really is the unscheduled outages. 17 MR. CURTIS: Yes, the forced outages. 18 MR. POCH: The forced outages. 19 MR. CURTIS: For that. 20 MR. POCH: And there the charge determinant is 21 going to levy a charge. 22 MR. CURTIS: Yes. 23 MR. POCH: And there they are not going to 24 avoid the connection charge to the extent that they 25 face --or network charge -- to the extent that they are 26 within that broadly defined peak, however the charge 27 determinant debate ends up. 28 MR. CURTIS: However that debate ends up, yes. Les Services StenoTran Services Inc. 613-521-0703 609 OHNC Panel 1, cr-ex (Poch) 1 MR. POCH: I think we have already discussed 2 how diversity helps mitigate any impact that has on the 3 network in any event. Correct? 4 MR. CURTIS: I think we have had a fairly 5 extensive discussion around the degree to which that 6 diversity impacts the network. Yes. 7 MR. POCH: Just turning then to -- I think I 8 have the right panel -- connection and transformation 9 net versus gross, just very briefly since I think many 10 of the points are similar. 11 First of all, this policy of simultaneous new 12 load and embedded generation, it would be treated 13 analogously, it would be net if it's simultaneous? 14 MR. CURTIS: No. 15 MR. POCH: No? 16 MR. CURTIS: Actually, I was wondering if it 17 might be helpful if we referred to the interrogatory 18 that we used to respond to that. 19 MR. POCH: Sure, if you have it. 20 MR. CURTIS: I believe it's AMPCO's 21 Interrogatory No. 6, so it's E-2 -- 22 MR. POCH: Is that 2? 23 MR. CURTIS: E-2, Tab 2, Exhibit 6. I'm 24 sorry, Exhibit E, Tab 2, Schedule 6. 25 --- Pause 26 MR. POCH: Yes. 27 MR. CURTIS: I think what you are referring to 28 is number (c). Les Services StenoTran Services Inc. 613-521-0703 610 OHNC Panel 1, cr-ex (Poch) 1 MR. POCH: The last bullet point there? 2 MR. CURTIS: No, it's the third. Number (c) 3 asked: 4 "Will the capping be applied to network 5 charges, line connection charges and 6 transformation connection charges?" 7 (As read) 8 The answer to (c) is that: 9 "The capping will be only for network 10 charges." (As read) 11 MR. POCH: Okay. The distinction there 12 between the way you are treating transformation and 13 connection versus network I take it is because you 14 assume they are going to need some transformation and 15 connection and therefore they should pay for it? 16 MR. CURTIS: Yes. 17 MR. POCH: Now, if you have an LDC, it has a 18 new embedded generator, it also has load growth amongst 19 it's other end-use customers. Isn't it possible that in 20 some cases you are going to have the two offsetting each 21 other? 22 MR. CURTIS: The definition that we have for 23 embedded generation is fairly specific in terms of it 24 supplying an identifiable load and being behind that 25 meter, but within the context of that what you are 26 saying is correct. 27 MR. POCH: Yes. I'm suggesting it would 28 reduce that identifiable load but you may have other Les Services StenoTran Services Inc. 613-521-0703 611 OHNC Panel 1, cr-ex (Poch) 1 loads inside that -- behind the same transmission system 2 meter at the LDC delivery point that are thriving? 3 MR. CURTIS: Yes, you may have. 4 MR. POCH: It wouldn't be uncommon in fact? 5 MR. CURTIS: I wouldn't expect that it would 6 be uncommon, that is correct. 7 MR. POCH: Okay. Your proposal, then, doesn't 8 recognize that on a net basis -- again I apologize for 9 using that term -- the transmission system may see no 10 decrease in load from that LDC? 11 MR. PORAY: Well, the transmission system may 12 in fact see an increase because if that generator goes 13 out of service that facility has to carry that 14 additional load. 15 MR. POCH: Sure. All right. 16 Finally, backing away from the connection 17 issue, if after we have taken account of all of these 18 different impacts, the offsetting impacts for the 19 various camps, the other LDCs, the LDCs, the embedded 20 generators and whoever, if we were to conclude that you 21 still want to somehow mitigate the rate shift, which is 22 I take what the exercise has been, it would seem to me, 23 correct me if I'm wrong, that you were able to mix and 24 match with three possibilities. 25 One is you can ration it with something like a 26 50 per cent rule, just give it some benefit and split 27 the difference, or what have you, and we could obviously 28 debate what number that should be. Les Services StenoTran Services Inc. 613-521-0703 612 OHNC Panel 1, cr-ex (Poch) 1 Another is, you could go to some kind of 2 transitional mechanism, OPGI's proposal being one such 3 mechanism, which ramps you from one state to another. 4 Another is, you could do it with definitions 5 as you have done by treating efficient generation 6 different than inefficient. 7 Then there is the mixes of the above. 8 Is that a fair summary? 9 MR. CURTIS: I would say that in terms of the 10 proposal that we put forward, we have talked about one 11 that you have categorized as transition and we have put 12 forward a net versus gross combination with the 13 longer-term view that it would be replaced by a 14 contracting mechanism. 15 But with that proviso I would agree with the 16 way you have characterized it. 17 MR. POCH: You have taken a little of each of 18 these -- 19 MR. CURTIS: Yes. 20 MR. POCH: -- from each of these columns. 21 MR. CURTIS: Yes. 22 MR. POCH: Would you agree that one of them, 23 that is the use of definition around efficiency, has an 24 advantage that the others don't, which is that it 25 preserves the societal benefit of more efficient 26 generation displacing less efficient generation? 27 MR. CURTIS: If that is an objective of 28 setting transmission rather, then, yes, I would agree Les Services StenoTran Services Inc. 613-521-0703 613 OHNC Panel 1, cr-ex (Poch) 1 with that. 2 MR. POCH: By including it you have 3 acknowledged, have you not, that it is an objective 4 whether the weighting is in debate? 5 MR. CURTIS: No, I don't think so. 6 The reason why it was included is that we had 7 some fairly strong representation from our stakeholders 8 that it should be included. 9 I think the overall issue, though, is on that 10 again we brought up in our direct evidence of the degree 11 to which the transmission tariff structure should embody 12 social or economic objectives is an issue that needs to 13 be addressed. 14 MR. POCH: If this Board concludes that it 15 does feel that that objective is appropriate for it to 16 consider as the statute speaks to it, you would agree we 17 could achieve whatever degree of rationing we wish of 18 the rate impact problem, if there is one, simply by 19 deciding at what level of efficiency we want to draw a 20 line. Then these don't need to work against one 21 another. 22 MR. CURTIS: I guess I would suggest at some 23 stage it becomes difficult as far as implementation is 24 concerned. We have set up a standard as far as 25 determining efficiency that is fairly objective in terms 26 of determining what generation qualifies as being 27 efficient and what doesn't. 28 If you want to use that as a fine-tuning Les Services StenoTran Services Inc. 613-521-0703 614 OHNC Panel 1, cr-ex (Poch) 1 parameter I think it would become increasingly difficult 2 to be able to clearly identify what generator qualifies 3 as being efficient and what doesn't. 4 MR. POCH: Thank you, Mr. Chairman. That is 5 my cross-examination. 6 THE PRESIDING MEMBER: Thank you, Mr. Poch. 7 Mr. Greenspoon, are you ready? 8 MR. GREENSPOON: Thank you, sir. 9 Do you wish me to proceed now, Mr. Chairman? 10 THE PRESIDING MEMBER: Yes. 11 MR. GREENSPOON: Thank you. 12 FURTHER CROSS-EXAMINATION 13 MR. GREENSPOON: Good morning, panel. 14 MR. CURTIS: Good morning. 15 MR. GREENSPOON: If you could turn up 16 Exhibit D, Tab 5, page 1, lines 11 to 14. 17 Your assertion is that a reduction in demand 18 will not result in a corresponding reduction of 19 transmission system costs primarily because of the 20 capital-intensive nature of transmission assets. We 21 have gone over that. That is your position. 22 MR. CURTIS: That is our position as applied 23 to existing transmission assets, yes. 24 MR. GREENSPOON: Would you agree that that 25 doesn't take into account the following: Existing, 26 extending useful life of investments; delaying scheduled 27 maintenance; delaying upgrade investments; and improving 28 the overall efficiency of delivery of energy? Les Services StenoTran Services Inc. 613-521-0703 615 OHNC PANEL 1, cr-ex (Greenspoon) 1 Just think about those and let me rephrase the 2 question as follows: That you offer no analysis of the 3 potential benefits of those things that I have 4 enumerated. 5 MR. CURTIS: Could you go over that list 6 again? 7 MR. GREENSPOON: All right. 8 MR. CURTIS: I'm sorry, I didn't have a chance 9 to copy them down. 10 MR. GREENSPOON: Extending the useful life of 11 investments. 12 MR. CURTIS: Yes. 13 MR. GREENSPOON: Delaying scheduled 14 maintenance; delaying upgrade of investments; and 15 improving the overall efficiency of the delivery of 16 energy. 17 MR. CURTIS: The last one, "improving" -- 18 MR. GREENSPOON: Improving the overall 19 efficiency of delivery of energy. 20 So I'm asking you whether you have a study 21 that analyzes those potential benefits to the system. 22 MR. POCH: When you say the "potential 23 benefits" you are talking about the installation of new 24 embedded generation achieving those -- 25 MR. GREENSPOON: No, I'm talking about a 26 reduction in demand for whatever reason. 27 MR. PORAY: We haven't done studies to 28 characterize those, no. Les Services StenoTran Services Inc. 613-521-0703 616 OHNC PANEL 1, cr-ex (Greenspoon) 1 MR. GREENSPOON: Likewise, if you turn to page 2 3 of the same exhibit, the same schedule, line 1 to 4, 3 you are repeating the principle about sunk costs and I 4 put it to you that there may be some efficiencies with 5 respect to obsolete and fully depreciated assets that 6 you haven't studied the impact, the positive impact that 7 embedded generation may have. 8 MR. CURTIS: How are you turning obsolete 9 and -- these assets still have a useful life in your 10 characterization? 11 MR. GREENSPOON: Yes. 12 MR. CURTIS: Yes. 13 MR. GREENSPOON: So you haven't studied that 14 component of sunk costs? 15 MR. CURTIS: No. 16 MR. GREENSPOON: For example, if we look at 17 the two maps or the one map -- well, actually, the point 18 is on both maps. I forget the exhibit number, Mr. 19 Chairman, but perhaps that is not necessary. There is a 20 line from Sudbury to -- I think it's to Mississagi, 21 which is approaching Sault Ste. Marie, do you see there 22 appears to be two parallel lines north of Lake Huron 23 going basically from the Sudbury area towards Sault Ste. 24 Marie. 25 MR. CURTIS: Yes. 26 MR. GREENSPOON: One of which serviced Elliot 27 Lake, the northerly one. 28 MR. CURTIS: Yes. Les Services StenoTran Services Inc. 613-521-0703 617 OHNC PANEL 1, cr-ex (Greenspoon) 1 MR. GREENSPOON: I take it that most of that 2 load has now disappeared, given all the mines are shut 3 down in Elliot Lake, all the mills are shut down in 4 Elliot Lake? 5 MR. CURTIS: I am not sure that we know the 6 exact load characteristics at Elliot Lake any more, but 7 generally -- 8 MR. GREENSPOON: That may be an example -- 9 MR. CURTIS: -- I think what you are saying is 10 right. 11 MR. GREENSPOON: I'm sorry, I don't mean to 12 interrupt you. 13 MR. ROGERS: It's just that the reporters will 14 have an awful time I think if we talk over one another. 15 MR. GREENSPOON: You said generally that seems 16 reasonable? 17 MR. CURTIS: If the load has disappeared 18 there. What I am saying is that I don't know the 19 specific details of what has happened at Elliot Lake in 20 terms of the load changes. 21 MR. GREENSPOON: All right. 22 That would be an example of a line that 23 perhaps we don't need any more? 24 MR. CURTIS: No. 25 MR. PORAY: I would characterize that line as 26 being really part of the network, not a radial line, and 27 there are transfers that take place between this part of 28 the system and the remaining part of the system which is Les Services StenoTran Services Inc. 613-521-0703 618 OHNC PANEL 1, cr-ex (Greenspoon) 1 shown on the right-hand side map called the west system. 2 So you can't just say because the load at Elliot Lake 3 has disappeared that that line is not performing a 4 function. 5 MR. GREENSPOON: But on either side of the 6 line there is only one line. You have a line that goes 7 from Sault Ste. Marie or Mississagi because Sault Ste. 8 Marie is served by Great Lakes Power, but you have a 9 line that runs along the eastern seaboard of Lake 10 Superior, only one line and then it divides into two, I 11 mean historically that second northern line was built 12 for Elliot Lake, wasn't it, and now Elliot Lake isn't 13 there that line is not necessary? 14 MR. CURTIS: I don't think -- no. 15 MR. ROGERS: There are a couple of questions 16 there. Was it built for Elliot Lake, number one, and, 17 secondly, is it still used and useful? 18 MR. CURTIS: It was built in part to serve 19 Elliot Lake and the answer to the second one is you have 20 established a parallel flow there by having the two 21 lines and they both served a network function. 22 MR. GREENSPOON: All right. There is a 23 possibility of obsolescence on some of the transmission, 24 there is no disagreement on that, is there? At some 25 point when we have more supply closer to load that there 26 may be pieces of the network that we don't need? 27 MR. CURTIS: I don't think that's our view. 28 Our view is that the network is there to serve all of Les Services StenoTran Services Inc. 613-521-0703 619 OHNC PANEL 1, cr-ex (Greenspoon) 1 the customers in Ontario. 2 MR. GREENSPOON: Have you read the evidence 3 that NorthWatch has filed from Carl Rabago? 4 MR. CURTIS: Yes. 5 MR. GREENSPOON: Do you agree with his 6 definition of distributed energy resources? 7 MR. CURTIS: Could we bring that up to look 8 at? 9 MR. GREENSPOON: You could, or I could just 10 put it to you that his definition -- 11 MR. ROGERS: Maybe we had better have a look 12 at it, Mr. Greenspoon. There is a lot of evidence that 13 these witnesses have tried to read and it's hard to keep 14 it all in mind. 15 MR. PORAY: We have the evidence. Which page 16 are you referring to? 17 MR. GREENSPOON: If I could just have a 18 moment, Mr. Chairman. 19 --- Pause 20 MR. GREENSPOON: Page 9, line 14. 21 MR. CURTIS: Yes. 22 MR. GREENSPOON: So distributed energy 23 resources include all manner of energy resources, 24 whether generation equipment, energy efficiency, 25 management technologies and services distributed 26 throughout the electric system? 27 MR. ROGERS: Just give the witnesses a chance 28 to read it. Just be comfortable with it, gentlemen. Les Services StenoTran Services Inc. 613-521-0703 620 OHNC PANEL 1, cr-ex (Greenspoon) 1 --- Pause 2 MR. ROGERS: The definition looks to be at the 3 bottom of page 8. 4 MR. CURTIS: Yes. 5 I guess the problem we are going to have with 6 this definition is that it includes a lot of different 7 types of devices and that. What we had concentrated on 8 in terms of our own definition for embedded generation 9 was the generator itself. 10 MR. GREENSPOON: Yes. 11 But these are things that happen in the energy 12 field. 13 MR. CURTIS: That's correct. That's the 14 difficulty we were having is that this definition lumps 15 all of those together and then goes on and talks about 16 benefits attributed to all of these collectively 17 together. We have tried to pinpoint the generation set, 18 if you will, part of the definition in terms of the 19 assessment that we have done. So it's difficult when he 20 goes on and starts describing what the benefits are that 21 come out of this. He is doing it collectively across 22 this group of technologies, as opposed to specifically 23 to the generating elements. 24 MR. GREENSPOON: Perhaps he will make that 25 clear when he gives his evidence. 26 MR. CURTIS: Yes. 27 MR. GREENSPOON: But you can confirm that you 28 have no studies that have looked at embedded energy Les Services StenoTran Services Inc. 613-521-0703 621 OHNC PANEL 1, cr-ex (Greenspoon) 1 resources like this as to the impact on the transmission 2 system? 3 MR. CURTIS: Apart from what we have filed and 4 what you see in our evidence, that's correct. 5 MR. GREENSPOON: Have you looked at the 6 reference that has been appended and that Mr. Rabago 7 refers to, the abstract from the Harvard Business Review 8 of the book by Amory Lovens? 9 MR. CURTIS: No, we haven't 10 MR. GREENSPOON: You haven't. 11 Are you familiar with the Rocky Mountain 12 Institute and Mr. Lovens? 13 MR. CURTIS: Broadly speaking, yes. 14 MR. GREENSPOON: Broadly speaking. 15 And would you agree that he is an eminent 16 leader in efficiency and electrical technologies? 17 MR. CURTIS: He is quite a proponent, quite a 18 spokesman for those technologies, yes. 19 MR. GREENSPOON: And that just if I could give 20 you a quote from that paper and you tell me if you agree 21 or disagree, that he said, now this is in the future and 22 I understand from your answers to Mr. Poch that you want 23 to draw a line at some point, but just maybe dotting 24 that line for a moment, what the abstract of the book 25 "Natural Capitalism" talks about is that there will be a 26 dramatic shift in the way electrical energy is used. Do 27 you agree with that? 28 MR. CURTIS: I don't think we are in a Les Services StenoTran Services Inc. 613-521-0703 622 OHNC PANEL 1, cr-ex (Greenspoon) 1 position to be able to agree or disagree with that, no. 2 MR. GREENSPOON: I wanted to ask you about the 3 issue of balancing and speaking of new generation, 4 embedded generation, new load or not new load. Just a 5 couple of specific examples, dealing with -- do you 6 recognize Manitoulin Island on that map, that's the 7 large island in Lake Huron? 8 MR. CURTIS: Yes. 9 MR. GREENSPOON: The transmission system 10 stops. There is a radio service from Espanola to Little 11 Current and that is the end of the system. 12 MR. CURTIS: Yes. 13 MR. GREENSPOON: From there on it is OHNCD? 14 MR. CURTIS: Yes. 15 MR. GREENSPOON: If a user, a customer, 16 embedded generation on OHNCD can we -- is it fair to say 17 that there will be a flow through of these rules, that 18 is the net gross rules? 19 MR. CURTIS: I think we are in the 20 uncomfortable position of not knowing that because that 21 will be determined through a distribution rates hearing 22 process. I think we made some broad statements in our 23 application that we feel that it probably should flow 24 through, but that is not to say that is the way it will 25 turn out. 26 MR. GREENSPOON: Okay. Assuming that costs 27 get passed on, it is very likely that if OHNCD is going 28 to pay gross for its electricity through the system they Les Services StenoTran Services Inc. 613-521-0703 623 OHNC PANEL 1, cr-ex (Greenspoon) 1 are going to pass that on to the embedded generator, the 2 transmission costs? 3 MR. PORAY: They will pass through their 4 rates, the transmission charges that they pay, to all of 5 their customers embedded within their service 6 territory,. 7 MR. GREENSPOON: So it happens that at the 8 very west end of Manitoulin Island there is a dolomite 9 quarry that is run by Lafarge Cement, a big industrial 10 company. They are on the OHNCD but it is of no use to 11 them because there is not enough electricity. 12 So they are running -- I apologize. I don't 13 mean to give evidence, Mr. Chairman, but I am just 14 giving this as an example -- they are running a 15 transport load of gas, of diesel fuel, everyday. A twin 16 tanker to run four continuous 12-cylinder caterpillar 17 generators to generate their electricity because there 18 isn't electricity. 19 Now, the gross versus net issue will be 20 important to them. They are sitting on the end of 21 Manitoulin Island directly into the prevailing northwest 22 wind. So whether they pay gross or net, if they were to 23 put up a wind farm, is a significant matter to them. 24 Would you agree? 25 MR. CURTIS: Are they serving their own load 26 then? 27 MR. GREENSPOON: Serving their own load and 28 perhaps balancing the load for OHNCD from Manitoulin Les Services StenoTran Services Inc. 613-521-0703 624 OHNC PANEL 1, cr-ex (Greenspoon) 1 Island. When the transmission line -- and I give this 2 as an example because there are many radio lines in 3 northern Ontario where there is no loop. So when the 4 radio line goes out that is it. 5 MR. CURTIS: That's right. 6 MR. GREENSPOON: Sometimes it can take hours, 7 even days, to correct the problem and meanwhile 8 everybody on the end of that radio line has no 9 electricity. 10 So yes, it serves their own load but it also 11 balances the system for Manitoulin Island or whatever 12 the radio load might be. 13 MR. CURTIS: I guess what I was trying to get 14 at, are we talking about new load that is going to be 15 serviced by these wind generators? 16 MR. GREENSPOON: Well, that is an interesting 17 question: Is that new load? It is an existing 18 operation. 19 MR. CURTIS: But in your example you were 20 talking about that load being serviced by their 21 generators. 22 MR. GREENSPOON: Right. So that would be -- 23 MR. CURTIS: They bring fuel in to run. So 24 from our perspective it would be new load and with a new 25 generator coming in place for the network services it 26 would be net billed,. 27 MR. GREENSPOON: But not connection? 28 MR. CURTIS: If it needs connection. I mean, Les Services StenoTran Services Inc. 613-521-0703 625 OHNC PANEL 1, cr-ex (Greenspoon) 1 this again is the issue for that load to decide. 2 MR. GREENSPOON: Right. 3 MR. CURTIS: But if it does need connection 4 then it would be gross billed. 5 MR. GREENSPOON: Moving to my friend Mr. 6 Poch's example of Falconbridge, or a broader example, 7 let's talk about the Sudbury Basin where Falconbridge is 8 the biggest direct on the system, I understand. I know 9 you can't confirm that, but I understand that they are. 10 You could agree that they are a big user. 11 They have an electric smelter that they installed in the 12 eighties. Is that correct? 13 MR. CURTIS: I wouldn't want to comment on the 14 specific equipment that Falconbridge has or hasn't, but 15 I would confirm that they are a significant load. 16 MR. GREENSPOON: Significant load and INCO is 17 a significant load. 18 MR. CURTIS: Just as INCO is a significant 19 load. 20 MR. GREENSPOON: And if we go about 30 miles 21 west, E.B. Eddy. Three significant loads in that area? 22 MR. CURTIS: Yes. 23 MR. GREENSPOON: A very large regional 24 municipality of about 150,000 people. If the City of 25 Sudbury wished to style themselves as a possible place 26 for high technology it would be useful for them to have 27 reliable supply, uninterruptible supply? Are you with 28 me? Les Services StenoTran Services Inc. 613-521-0703 626 OHNC PANEL 1, cr-ex (Greenspoon) 1 MR. CURTIS: I am with you, yes. 2 MR. GREENSPOON: All right. So if INCO wants 3 to put in ex-number -- let's say five megawatts as 4 embedded generation, and Falconbridge wants to put in 5 five megawatts, and E.B. Eddy wants to put in five 6 megawatts -- so you have got a little section of 7 transmission line where there is three embedded 8 generators and the City of Sudbury wants uninterruptible 9 supply. Going back to the definition of energy 10 resources to include storage, it may be that those 11 embedded generators could be directly connected to a 12 high-tech energy supply for a high-tech industry in 13 Sudbury? 14 MR. CURTIS: It could be, yes. 15 MR. GREENSPOON: And that load would not 16 necessarily ever have to travel through the rest of the 17 transmission system at all? 18 MR. CURTIS: Well, in all likelihood, it 19 would. It would, though, in terms of the way you would 20 have to set up the lines. There would still be parallel 21 paths that would be induced to service that load. 22 MR. GREENSPOON: Yes, but it would be a 23 penalty to that attempt by the region to charge them 24 gross load. It would make it less attractive? 25 MR. CURTIS: You are talking about these 26 generators both being originally installed to serve the 27 loads of their native hosts? 28 MR. GREENSPOON: Yes, yes. Les Services StenoTran Services Inc. 613-521-0703 627 OHNC PANEL 1, cr-ex (Greenspoon) 1 MR. CURTIS: That would be -- 2 MR. GREENSPOON: That would be gross. 3 MR. CURTIS: As opposed to the alternative 4 where they would be established to serve these brand new 5 loads, these high-tech loads. In which case, they would 6 be net. What we are talking about here is there has to 7 be a choice made by the load customer. 8 MR. GREENSPOON: Yes, but realistically, 9 Falconbridge and INCO and E.B. Eddy would more likely 10 consider putting in a little excess capacity for this 11 new technology, but they might want to -- for example, 12 Falconbridge and INCO, or Falconbridge particularly, 13 would not have an opportunity for cogeneration. They 14 have no steam load. They have no need. 15 MR. CURTIS: I don't know. I don't know the 16 characteristics. 17 MR. GREENSPOON: Well, assuming that they 18 don't. So this high-tech electricity that I am talking 19 about might be on top of something that they might embed 20 for their existing load that might be of benefit to the 21 community and yet of little impact to the system? 22 MR. CURTIS: I think that what the issue is 23 going to be is how reliably it is going to serve this 24 new demand of the new load. 25 MR. GREENSPOON: Has OHNC considered any 26 possibility of emission trading with respect to 27 efficiency -- with respect to energy -- I am sorry -- 28 embedded generation? Les Services StenoTran Services Inc. 613-521-0703 628 OHNC PANEL 1, cr-ex (Greenspoon) 1 MR. CURTIS: No. That is an issue that is 2 more related to the commodity from what I see. 3 MR. GREENSPOON: Okay. So there has been no 4 consideration, for example if Falconbridge, again using 5 that example, or another customer was under a control 6 order that they could be given some benefit for 7 embedding generation and it would be at net because they 8 would be then offsetting the impact on the environment? 9 MR. CURTIS: No. But again, it is because we 10 are talking about the commodity side of the business and 11 what we are addressing is just transmission tariffs. 12 MR. GREENSPOON: Right. 13 Your exemption for 1 megawatt, what was the 14 consideration of the possibility of encouraging a 15 highly-polluting generator to generate 1 megawatt? Why 16 was that not excluded? For example, if I wanted to put 17 in an unscrubbed coal plant of 1 megawatt I could do 18 that. 19 MR. CURTIS: I am not sure whether you could 20 do that. Probably in terms of the technology it would 21 be pretty -- it would produce energy at a pretty high 22 cost to do it that way. 23 MR. GREENSPOON: Well, Atikokan and Thunder 24 Bay produce energy for OPG unscrubbed, and they are 25 running right as we speak. 26 MR. CURTIS: Yes, but those are much larger 27 units than a 1 megawatt unit. 28 MR. GREENSPOON: I see. Okay. Les Services StenoTran Services Inc. 613-521-0703 629 OHNC PANEL 1, cr-ex (Greenspoon) 1 MR. CURTIS: It is in terms of the scale of 2 efficiency, thermal efficiency, that we are talking 3 about. 4 MR. GREENSPOON: But, in any event, it is not 5 excluded? 6 MR. CURTIS: That's correct. It's not 7 excluded. 8 MR. GREENSPOON: All right. Now, I just want 9 to close. 10 Do you recall at the settlement conference 11 there was a gentleman at the back who pointed out that 12 with open access in New England there were some 13 surprises? There was congestion, for example. 14 I'm just wondering if there is a danger of -- 15 if OHNC is concerned about a danger of surprise and 16 being too dogmatic with this application, and the 17 parameters that you have set out for the Board. Are we 18 going to -- no pun intended -- are we going to embed 19 ourselves in a position that is not in the best 20 interests of OHNC or the people of this province? 21 MR. CURTIS: We don't believe so. What we 22 have put forward is a position that we think could be 23 modified if required on a going-forward basis, so I 24 don't see that we are embedding ourselves, to use your 25 terminology, in something that couldn't be modified in 26 the future if it was required. 27 MR. GREENSPOON: But it is largely based on 28 compromise and placation to the stakeholders and not Les Services StenoTran Services Inc. 613-521-0703 630 OHNC PANEL 1, cr-ex (Greenspoon) 1 based, as you have indicated, on a lot of study as to 2 where this may lead us? 3 MR. ROGERS: I don't think he said that. 4 MR. CURTIS: Well, no, I didn't say that. 5 MR. GREENSPOON: If you disagree, that is 6 fine. 7 MR. CURTIS: We disagree. 8 MR. GREENSPOON: All right. Just briefly, can 9 you tell me why you disagree? 10 MR. CURTIS: As we stated in our direct 11 evidence, we started off with the principles that we 12 have put forward in our evidence, and that is what we 13 have endeavoured to use by and large. We have done 14 extensive stakeholdering, we have listened to our 15 stakeholders, but we have gone on at that point to do 16 some assessment analysis work that again, by and large, 17 we have shared with our stakeholders to see whether or 18 not there is any change in terms of positions and that. 19 But what we have put forward in the end is what we feel 20 would be best for our industry and in terms of serving 21 our customers. 22 MR. GREENSPOON: All right. 23 Those are my questions, Mr. Chairman. Thank 24 you very much. 25 THE PRESIDING MEMBER: Mr. Campbell. 26 FURTHER CROSS-EXAMINATION 27 MR. CAMPBELL: Gentlemen, in your direct you 28 described that the stakeholders had been adamant in the Les Services StenoTran Services Inc. 613-521-0703 631 OHNC PANEL 1, cr-ex (Campbell) 1 positions that they had taken and, certainly, judging by 2 the cross-examinations we have seen, you would agree 3 with me that they continue to be adamant as to the evils 4 of gross load billing. A fair characterization? 5 MR. CURTIS: Yes. And the other side. Our 6 position has been that the stakeholders have been fairly 7 adamant, very adamant in terms of whether they are 8 supporting gross load or a net load billing. 9 MR. CAMPBELL: All right. But they have 10 certainly been -- from the questions you have been asked 11 by the proponents of gross load billing -- by the 12 proponents of net load billing, rather, the evils of 13 gross load billing have been adamantly portrayed. 14 MR. CURTIS: Yes. 15 MR. CAMPBELL: The thing that rather puzzles 16 me in all of this is that with these apparent flaws that 17 are seen in gross load billing, and given the view of 18 the proponents of net load billing that it contravenes 19 the purposes of the Electricity Act, how could it have 20 been the market development committee -- Market Design 21 Committee, I'm sorry, which was kind of a diverse body 22 that was charged by the government with the task of 23 designing a market to implement the Electricity Act? 24 How could it be that they recommended gross load billing 25 so clearly? 26 MR. PORAY: I think the Market Design 27 Committee's perspective certainly was focused on the 28 efficiency of the marketplace in terms of new generation Les Services StenoTran Services Inc. 613-521-0703 632 OHNC PANEL 1, cr-ex (Campbell) 1 coming on to compete. What they were trying to do is to 2 address the issue of the transmission portion of the 3 marketplace which is a non-competitive component and try 4 and establish that the recovery of costs of that 5 non-competitive component will be done in such a way so 6 as not to send perverse signals to the marketplace in 7 terms of new generation entering that marketplace. 8 So what they were trying to focus on is not to 9 provide any signals that might result in uneconomic 10 generation. 11 MR. CAMPBELL: All right. 12 And having dealt with those considerations, 13 you can confirm for me that the MDC, after all of its 14 work, came down squarely on the side of gross load 15 billing? 16 MR. PORAY: For the recovery of transmission 17 costs. 18 MR. CAMPBELL: Right. 19 I want to turn, then, to this discussion about 20 the relationship between load growth on the one hand and 21 embedded generation on the other. I want you to assume, 22 for the purposes of this discussion, that we have a 23 network system with extra capacity, and there is some 24 load growth being experienced in that system. Would you 25 agree with me that the effect of that load growth is to 26 lower rates for all customers? 27 MR. CURTIS: Yes, it is. 28 MR. CAMPBELL: And the reason that is is Les Services StenoTran Services Inc. 613-521-0703 633 OHNC PANEL 1, cr-ex (Campbell) 1 because the largely fixed costs of the system are spread 2 over more load? 3 MR. CURTIS: Yes. 4 MR. CAMPBELL: Now, I want you to consider, 5 then, what happens under net billing, as espoused by my 6 friends, when a customer installs embedded generation -- 7 I'm going to try and make a simple example which is 8 installing embedded generation in an amount that 9 precisely equals the amount of load growth. So in a 10 particular year you have so much load growth, you have 11 exactly the same amount of embedded generation going in. 12 MR. CURTIS: Yes. 13 MR. CAMPBELL: Now, in those circumstances, 14 aren't I correct that regardless of that load growth the 15 rates won't go down for all customers? 16 MR. CURTIS: For the existing customers, 17 that's correct, yes. 18 MR. CAMPBELL: And they will only go down, in 19 fact, for the customer who installs embedded generation? 20 MR. CURTIS: That's correct, yes. 21 MR. CAMPBELL: So that, in effect, the single 22 customer that installed embedded generation has captured 23 all of the rate reduction benefit from the load growth, 24 it captured all the benefit that would otherwise have 25 gone to all customers? 26 MR. CURTIS: That is the way it is done, yes, 27 that's correct. 28 MR. CAMPBELL: Am I correct that as long as Les Services StenoTran Services Inc. 613-521-0703 634 OHNC PANEL 1, cr-ex (Campbell) 1 there is extra capacity on the network, customers 2 installing embedded generation will continue to capture 3 the benefits of load growth? 4 MR. CURTIS: Yes, that's correct. 5 MR. CAMPBELL: Those benefits of load growth, 6 then, are not available to be spread amongst all of the 7 customers. 8 MR. CURTIS: Yes. 9 MR. CAMPBELL: Now, there are a number of 10 theoretical benefits that have been suggested by my 11 friends, things like extending the useful life of 12 facilities, delaying maintenance and so on. 13 Looking at your system, the OHNC system, as it 14 exists today, would you agree that those theoretical 15 benefits are not very material? 16 MR. CURTIS: I think broadly speaking, yes. 17 MR. CAMPBELL: And the reason for that, as I 18 understand it, is that there is a large gap between 19 where the OHNC system is today and the amount of room 20 there is on that system for expansion -- that is, the 21 amount where the load is today -- there is a good 22 cushion before you need to make major additions to the 23 transmission system. 24 MR. CURTIS: Generally speaking, that's 25 correct. Although in certain specific areas that may 26 not be correct in terms of where the growth 27 materializes. 28 MR. CAMPBELL: No. Generally speaking, Les Services StenoTran Services Inc. 613-521-0703 635 OHNC PANEL 1, cr-ex (Campbell) 1 looking at the network system. 2 MR. CURTIS: Broadly speaking, that's correct. 3 Yes. 4 MR. CAMPBELL: And so it's only when the 5 system is approaching full utilization and you have to 6 begin planning to add capacity that the presence of new 7 generation has the potential to benefit other customers 8 by deferring new investment. 9 MR. CURTIS: On the network side, yes. That's 10 correct. 11 MR. CAMPBELL: Now, for those of us -- 12 probably the lawyers shouldn't be included in this -- 13 but for those of us who wanted to try to do some 14 quantification, in the methodology for trying to 15 quantify some of that benefit, if there was a generator 16 that came in that deferred transmission, say, from 2015 17 to 2016, the benefit of that deferral would be the 18 difference in cost between those two years brought 19 forward to a net present value now. 20 MR. CURTIS: Yes. 21 MR. CAMPBELL: We are not dealing with the 22 cost of the whole facility, it's just the difference in 23 cost -- 24 MR. CURTIS: That's correct. 25 MR. CAMPBELL: -- for the deferral brought 26 forward and the time periods that we are talking about, 27 the 10 to 25 years that you have been talking about, 28 that's going to be a very small amount, will it not? Les Services StenoTran Services Inc. 613-521-0703 636 OHNC PANEL 1, cr-ex (Campbell) 1 MR. CURTIS: By and large it will be, yes. 2 MR. PORAY: Yes, it would. Just to clarify, 3 it would depend really on what the investments were and 4 how big the transmission capacity that was needed. 5 MR. CAMPBELL: Indeed, but my simple point is 6 that we are talking about the net present value of the 7 deferral from one year to the next. 8 MR. PORAY: That is correct, yes. 9 MR. CAMPBELL: Not the net present value of 10 the facilities. 11 MR. PORAY: That is correct. 12 MR. CURTIS: That's correct, right. 13 MR. CAMPBELL: All right. Now, based on your 14 experience in the industry, are all planned generation 15 facilities actually constructed? 16 MR. CURTIS: No. 17 MR. CAMPBELL: As a result, I take it you 18 would not want to adjust your transmission planning 19 solely because a new generator is proposed, although 20 presumably you would want to keep an eye on eye on that 21 situation once you knew a generator was being 22 considered. Would that be a fair generalization? 23 MR. CURTIS: Yes, but again, just to caution. 24 We are not going to be the ones responsible for the 25 generation planning and the generation expansion going 26 forward necessarily. There will be other parties like 27 the IMO that will be involved in this. 28 MR. CAMPBELL: I think you meant transmission Les Services StenoTran Services Inc. 613-521-0703 637 OHNC PANEL 1, cr-ex (Campbell) 1 planning. 2 MR. CURTIS: Transmission planning. Sorry. 3 MR. CAMPBELL: Okay. But at least looked at 4 from your perspective, would I be correct in concluding 5 that OHNC's position would be that it would want to wait 6 until it had some sort of solid assurance that a 7 generator was going ahead, such as a connection 8 agreement, before you committed your money to building 9 it and relied on it for purposes of transmission 10 planning. 11 MR. CURTIS: Yes. That's right. 12 MR. CAMPBELL: Now, I want to also look at 13 this issue of embedded generation generally in terms of 14 the changes that are occurring with restructuring in the 15 industry. In doing that, just sort of do a quick, very 16 quick, review of kind of what generation other than 17 Ontario Hydro generation, what the position was 18 pre-restructuring, if you will. 19 MR. CURTIS: Okay. 20 MR. CAMPBELL: Am I not correct that it was 21 the policy of the former Ontario Hydro that MEUs were 22 not allowed to install embedded generation? 23 MR. CURTIS: Yes. 24 MR. CAMPBELL: And under the former Ontario 25 Hydro, were industrial customers free to sell the excess 26 output from their embedded generation to other 27 customers? 28 MR. CURTIS: Not typically, no. No, they Les Services StenoTran Services Inc. 613-521-0703 638 OHNC PANEL 1, cr-ex (Campbell) 1 weren't. 2 MR. CAMPBELL: And under the former Ontario 3 Hydro, industrial customers couldn't wheel power between 4 their own facilities so that if an AMPCO plant had 5 excess generation capacity in one location, it didn't 6 have the right to wheel that through the transmission 7 system to some other location in the province where it 8 had facilities. 9 MR. CURTIS: Over at least the last seven 10 years, I believe, of Ontario Hydro, that's correct. 11 Yes. 12 MR. CAMPBELL: Okay. Using the example of my 13 friends from IPSO, they couldn't simply build a plant 14 somewhere that they found an opportunity and wheel power 15 from there to customers throughout the province. 16 MR. CURTIS: That's correct. Yes. 17 MR. CAMPBELL: And in fact, am I not correct 18 that under the policies of the former Ontario Hydro, 19 customers were either prohibited entirely from 20 installing embedded generation, for instance MEUs, or 21 restricted to installing embedded generation for their 22 own use or for resale to Ontario Hydro and then only if 23 Ontario Hydro was willing to purchase it. 24 MR. CURTIS: Yes, that's correct. 25 MR. CAMPBELL: That's a fair summary of that. 26 MR. CURTIS: That's a fair summary. Yes. 27 MR. CAMPBELL: Now, am I not also correct that 28 with restructuring, generators will be able to do all Les Services StenoTran Services Inc. 613-521-0703 639 OHNC PANEL 1, cr-ex (Campbell) 1 these things? 2 MR. CURTIS: That is our understanding under 3 the Act. Yes. 4 MR. CAMPBELL: So under the forthcoming 5 marketplace, customers will have greatly expanded 6 opportunities for embedded generation. Isn't that 7 right? 8 MR. CURTIS: Yes. 9 MR. CAMPBELL: So the value of the embedded 10 generation opportunity has gone up significantly because 11 of these expanded opportunities. 12 MR. CURTIS: Yes, I think we would agree with 13 that. 14 MR. CAMPBELL: I take it you also agree that 15 in taking up these expanded opportunities, it's only 16 fair that customers installing embedded generation 17 shouldn't be allowed to completely walk away from the 18 transmission costs incurred for their benefit. 19 MR. CURTIS: That is a position we put forward 20 and that's the position that we have heard from a number 21 of the stakeholders involved. Yes. 22 MR. CAMPBELL: And is that OHNC's position as 23 well? 24 MR. CURTIS: Yes, it is. 25 MR. CAMPBELL: Now, I want to turn to the 26 recent Alberta decision. Mr. Brown took you to section 27 14.4 of that decision, which was a discussion of 28 net/gross as that applies in the circumstances of Les Services StenoTran Services Inc. 613-521-0703 640 OHNC PANEL 1, cr-ex (Campbell) 1 Alberta's industry. 2 MR. CURTIS: Yes. 3 MR. CAMPBELL: Do you recall that? 4 MR. CURTIS: Yes. 5 MR. CAMPBELL: Now, before we get to the 6 excerpt that we provided to you last Tuesday, I first 7 want to go through one thing with you. For those who 8 are trying to follow this in the record, the excerpt 9 provided by Mr. Brown, I believe, was given Exhibit No. 10 6.2.2 -- G2.2. It has some writing lessons for my 11 friend here. 12 Now, you listed, when you were asked some 13 questions last Thursday, some considerations that are 14 relevant to the appropriate choice between net and gross 15 in any particular jurisdiction. Do you recall that? 16 MR. CURTIS: Yes. I believe the discussion 17 was around other areas that should be examined in the 18 Alberta decision. 19 MR. CAMPBELL: Right. 20 MR. CURTIS: Yes. 21 MR. CAMPBELL: Now, I would like to suggest 22 some others to you and ask if they might also be 23 relevant to this net/gross choice. 24 MR. CURTIS: All right. 25 THE PRESIDING MEMBER: The first I will ask 26 you is: would the need for new transmission capacity be 27 a relevant consideration? 28 MR. CURTIS: Yes, it would. I think I alluded Les Services StenoTran Services Inc. 613-521-0703 641 OHNC PANEL 1, cr-ex (Campbell) 1 to that in terms of the load growth situation in the two 2 provinces. 3 MR. CAMPBELL: And the question of how 4 widespread that need was across the province would also 5 be a relevant consideration. 6 MR. CURTIS: Yes, it would. 7 MR. CAMPBELL: And how soon it is needed in 8 each case would be a relevant consideration. 9 MR. CURTIS: Yes, it would. 10 MR. CAMPBELL: And whether or not there is any 11 significant transmission congestion would be a 12 significant consideration. 13 MR. CURTIS: Yes, it would. 14 MR. CAMPBELL: And would you agree that other 15 aspects of rate design, such as inclusion of a ratchet, 16 can have as much impact on a potential generator as the 17 net/gross choice we have been talking about? 18 MR. CURTIS: I'm not sure I would know in a 19 quantitative sense, but it certainly would be a 20 significant component in the decision. 21 MR. CAMPBELL: All right. Well, if I could 22 take you, then, to the Alberta excerpt and perhaps we 23 could -- 24 MS LEA: Does this excerpt have an exhibit 25 number, Mr. Campbell? 26 MR. CAMPBELL: Great minds, what can I say. 27 MS LEA: Can we assign exhibit, then, G4.1 to 28 this excerpt. Les Services StenoTran Services Inc. 613-521-0703 642 OHNC PANEL 1, cr-ex (Campbell) 1 MR. CAMPBELL: G.4.1? 2 MS LEA: Yes. 3 MR. CAMPBELL: It is section 14(3) of the 4 decision in Alberta, which was the 1999-2000 General 5 Rate Application. 6 MS LEA: Thank you. 7 EXHIBIT NO. G4.1: Section 14(3) of the 8 Alberta decision in the 1999-2000 General 9 Rate Application 10 MR. CAMPBELL: Gentlemen, I take it you have 11 had the opportunity to review this extract? 12 MR. CURTIS: Yes. 13 MR. CAMPBELL: It's the one that immediately 14 precedes the section that Mr. Brown put to you? 15 MR. CURTIS: Yes. 16 MR. CAMPBELL: Am I correct that, as shown in 17 G4.1, when it shows net billing the Board in Alberta 18 combined that net billing with a ratchet provision and 19 other measures designed to recover embedded costs? 20 MR. CURTIS: That's our understanding, yes. 21 MR. CAMPBELL: EAL was the transmission 22 authority that put those proposals forward? 23 MR. CURTIS: Yes. 24 MR. CAMPBELL: If I could take you to page 215 25 of Exhibit G4.1, under the last -- under the heading 26 "Board Findings", you see the last sentence that reads: 27 "The Board agrees that the direction that 28 EAL has taken is appropriate." (As read) Les Services StenoTran Services Inc. 613-521-0703 643 OHNC PANEL 1, cr-ex (Campbell) 1 MR. CURTIS: Yes. 2 MR. CAMPBELL: That was with respect to 3 matters such as notice provision and ratchet? 4 MR. CURTIS: Yes. 5 MR. CAMPBELL: All right. So let's go back, 6 then, and talk a little bit about what in fact they did. 7 If I take you back to page 208, I first want 8 to direct your attention to three items. 9 First of all, about the middle of the page you 10 see that customers are required to declare a contract 11 capacity? 12 MR. CURTIS: Yes. 13 MR. CAMPBELL: During the term of that 14 contract -- if I go down two headings, during the term 15 of that contract they are required -- I was going to say 16 they are required to take, but they can take whatever 17 they want -- 18 MR. CURTIS: Yes. 19 MR. CAMPBELL: -- but having declared a 20 contract capacity they will be billed for no less than 21 90 per cent of that contract capacity regardless of the 22 load they take. Correct? 23 MR. CURTIS: Yes. 24 MR. CAMPBELL: If they want to change the 25 contract, that is lower the contract capacity, they are 26 subject to a five-year notice period. I think you find 27 that at the beginning of the paragraph that starts at 28 the bottom of the page. Les Services StenoTran Services Inc. 613-521-0703 644 OHNC PANEL 1, cr-ex (Campbell) 1 MR. CURTIS: Yes, that is our understanding. 2 MR. CAMPBELL: Now, let me take you through 3 and ask you to work through an example with me. I'm 4 dealing particularly here with the notice period. 5 If a customer was planning an embedded 6 generator and he thought, "Well, I can have it up and 7 running in two years", and if it gave notice that it 8 planned to lower its contract -- lower its take, it 9 would have to give a five-year notice. 10 MR. CURTIS: Yes, that is our understanding. 11 MR. CAMPBELL: If it was a hundred megawatt 12 load and a 50 megawatt generator, the practical result 13 of that is that for the first two years when it was 14 building its generator it would be billed at a -- and 15 would be taking 100 per cent of this contract load -- 16 MR. CURTIS: Yes. 17 MR. CAMPBELL: -- but for the next three 18 years, assuming the generator then came into service and 19 its net load was only 50 megawatts, because the 20 generator was supplying 50 megawatts of the 100 megawatt 21 load, for the next three years of the notice period it 22 would be billed at 90 megawatts, that is 90 per cent of 23 its contract demand because of that minimum contract 24 requirement. 25 MR. CURTIS: Yes, it would be following its 26 previous contract and the minimum requirements under 27 that contract. 28 MR. CAMPBELL: Okay. So let's carry our Les Services StenoTran Services Inc. 613-521-0703 645 OHNC PANEL 1, cr-ex (Campbell) 1 example a little farther and take it through the 2 situation where the generator is up and running, the 3 notice period is over, the demand -- the historical 4 demand level has been adjusted down by the 50 megawatts 5 so that if you look back it is all being treated now as 6 if its load is 50 megawatts. That is the situation 7 going forward. 8 MR. CURTIS: Yes. 9 MR. CAMPBELL: Then I would like to see how 10 the ratchet works, and I will give you this example: In 11 January of a year when its contract demand has been 12 reduced to 50 megawatts, in January of a year it has a 13 forced outage on peak and it's at a time the plant is 14 running full load, the generator goes down, on comes the 15 other 50 megawatts of load onto the system. 16 So, as I understand it, what's referred to in 17 the decision at page 208 as the highest metered demand 18 would go up from 50 to 100 in that circumstance, back to 19 the 100 megawatts of load. 20 MR. CURTIS: Yes. I think the first bullet 21 applies. For the month of January it would be billed on 22 100 megawatts. 23 MR. CAMPBELL: Then if we go forward for the 24 next 12 months it would be billed -- oh, let me do an 25 important qualification. 26 The generator has gone off, they fix it, it 27 comes back on in January -- 28 MR. CURTIS: Yes. Les Services StenoTran Services Inc. 613-521-0703 646 OHNC PANEL 1, cr-ex (Campbell) 1 MR. CAMPBELL: -- so that going forward the 2 load continues to be measured at 50 megawatts. 3 MR. CURTIS: Yes. 4 MR. CAMPBELL: But the way the ratchet works, 5 it says because you took that 100 megawatts in January, 6 then for the next 12 months, as I see this, the billing 7 demand in any month will be the highest -- will be above 8 the 50 months because it will be 90 per cent of the 9 highest metered demand in the previous 12 month, which 10 is the second bullet under -- the second bullet point 11 shown on page 208. 12 MR. CURTIS: Yes, that is our understanding. 13 It would be 90 -- 14 MR. CAMPBELL: Similarly, it keeps clicking 15 down and it isn't until five years later that the actual 16 billing demand clicks down again to the 50 megawatts 17 that the meter is actually measuring, assuming the 18 generator is running. 19 MR. CURTIS: That's our understanding, yes. 20 --- Pause 21 MR. CAMPBELL: I take it, then, that what in 22 fact is happening here is that the ratchet is having an 23 effect that is very much like gross load billing, 24 billing well above the actual metered demand. 25 MR. CURTIS: Yes. 26 MR. CAMPBELL: Now, if I can take you, then, 27 to page 209 of the decision. I am reading here the last 28 sentence on the paragraph that runs over from the Les Services StenoTran Services Inc. 613-521-0703 647 OHNC PANEL 1, cr-ex (Campbell) 1 previous page. It reads as follows: 2 "Should a customer either terminate or 3 reduce system access service within 4 10 years of the construction of new or 5 upgraded facilities an exit contribution 6 as calculated by Article 15.4 of the 7 Terms and Conditions may be payable." 8 (As read) 9 Do you see that sentence? 10 MR. CURTIS: Yes, I do. 11 MR. CAMPBELL: Now, maybe just briefly you 12 could explain what an exit fee or an exit contribution 13 is, just in general terms? 14 MR. CURTIS: An exit fee or an exit 15 contribution is a payment made by a customer for the 16 facilities that were installed to serve that customer if 17 the customer decides to leave the system within a -- 18 over a predefined period. 19 MR. CAMPBELL: So if your customer installed 20 an embedded generator, thereby reducing their metered 21 load, they could be subject to an exit fee under this 22 provision. 23 MR. CURTIS: Yes, that is our understanding. 24 MR. PORAY: Perhaps I could just add to that, 25 that that exit contribution would be agreed to between 26 the customer and the transmission provider and 27 ultimately it would be agreed by the regulator as well. 28 MR. CAMPBELL: I take it that in this proposal Les Services StenoTran Services Inc. 613-521-0703 648 OHNC PANEL 1, cr-ex (Campbell) 1 before this Board OHNC is not proposing any exit fee in 2 this application for customers who either terminate or 3 reduce their use of network facilities that were either 4 newly constructed or upgraded in, say, the last 5 10 years. 6 MR. CURTIS: That is correct. 7 MR. CAMPBELL: You would agree, however, that 8 this is one method to address cost shifting that will 9 occur if the customers for whom such facilities was 10 instructed or upgraded leave the system? 11 MR. CURTIS: It is one possible mechanism, 12 yes. 13 MR. CAMPBELL: And I take it that you also 14 agree that the 10 year phase out of gross load billing 15 that has been proposed by my client, OPG, we have a 16 similar effect? It's another method. 17 MR. CURTIS: It's another method, yes. 18 MR. CAMPBELL: Then, if I can take you to the 19 second full paragraph on the page and I would like to 20 refer you to the next-to-last sentence, that sentence 21 reads as follows and it is speaking here of the proposed 22 arrangements that were ultimately approved by the Board, 23 the sentence I am referring to reads as follows: 24 "It also struck an important balance 25 between customers who planned to leave 26 the system or significantly reduce their 27 usage in the next few years and other 28 customers who remain on the system." Les Services StenoTran Services Inc. 613-521-0703 649 OHNC PANEL 1, cr-ex (Campbell) 1 (As read) 2 Do you see that sentence? 3 MR. CURTIS: Yes, I do. 4 MR. CAMPBELL: Now, based on your testimony to 5 date in these proceedings, am I correct in my 6 understanding that you would agree that it's important 7 to balance the interest of customers who plan to leave 8 the system or significantly reduce their usage and 9 customers who remain on the system? That's a sentiment 10 in Alberta that you would agree with? 11 MR. CURTIS: Yes. Yes, we did and we included 12 that as part of our stakeholdering. 13 MR. CAMPBELL: If I could ask you to briefly 14 review the third full paragraph on that page. It's the 15 one that starts with "EAL noted that many 16 individuals....". Could you read that paragraph, 17 please. 18 MR. CURTIS: Yes. 19 --- Pause 20 MR. CURTIS: Yes. 21 MR. CAMPBELL: At the beginning of that 22 paragraph they talk about the state of the Alberta 23 system, do they not? 24 MR. CURTIS: Yes, they do. 25 MR. CAMPBELL: I want you to talk a little bit 26 about the state of the Ontario system. Is it generally 27 true that the transmission system is not constrained in 28 Ontario? Les Services StenoTran Services Inc. 613-521-0703 650 OHNC PANEL 1, cr-ex (Campbell) 1 MR. CURTIS: Generally speaking, that's 2 correct. 3 MR. CAMPBELL: And is it also true that 4 Ontario's load growth rate in recent years has not been 5 vigorous? 6 MR. CURTIS: That is correct. 7 MR. CAMPBELL: And, in fact, we can see, and 8 you won't need to turn it up, but I believe the figures 9 given in Interrogatory E15.6, where the weather 10 corrected average annual load growth rate in peak demand 11 over the period '95 to '99 was 0.1 per cent. Is that 12 consistent with your understanding? 13 MR. PORAY: Can we maybe just check that? 14 MR. CURTIS: Yes, we would still agree with 15 that. 16 MR. CAMPBELL: All right. 17 In fact, would I not also be correct that 18 virtually all of the network transmission lines in 19 Ontario operate well below their thermal ratings the 20 vast majority of the time? 21 MR. CURTIS: Yes, there are certain specific 22 areas of the province where there are thermal problems, 23 but if you are dealing with the network by and large you 24 are correct. 25 MR. CAMPBELL: And given those differences in 26 conditions between Alberta that are referred to in that 27 third paragraph on the page and Ontario, would you 28 expect that it is even more true in Ontario than in Les Services StenoTran Services Inc. 613-521-0703 651 OHNC PANEL 1, cr-ex (Campbell) 1 Alberta that underutilization may result when customers 2 exit the system in Ontario? 3 MR. CURTIS: Yes, I would agree. 4 MR. CAMPBELL: And I take it you would also 5 agree with the Alberta transmission administrator that 6 revenues are required from customers leaving the system 7 in order, as they said, to balance the financial impacts 8 for remaining customers who are otherwise encumbered 9 with the full cost of the underutilized facilities? 10 MR. CURTIS: That would certainly be more 11 equitable than all of the costs having to be shifted 12 over to the remaining customers. 13 MR. CAMPBELL: Mr. Chairman, I am moving on to 14 a new section in my cross-examination. I wondered if 15 you wanted to take the lunch break now or a little 16 later? 17 THE PRESIDING MEMBER: In 10 minutes, please. 18 MR. CAMPBELL: Ten minutes? 19 THE PRESIDING MEMBER: Yes. 20 Mr. Campbell, we have a clarification here 21 as well. 22 MEMBER VLAHOS: Mr. Campbell, could you please 23 clarify something for me. When you took the witness to 24 page 14 of this exhibit, in the paragraph starting "In 25 argument...." and you read the penultimate sentence from 26 this, "It also struck...." that sentence. 27 MR. CAMPBELL: The page numbers are down in 28 the lower right of the page. Les Services StenoTran Services Inc. 613-521-0703 652 OHNC PANEL 1, cr-ex (Campbell) 1 MEMBER VLAHOS: Okay. Page 209. The second 2 full paragraph, the sentence beginning "It also struck 3 an important balance...." 4 MR. CAMPBELL: Yes. 5 MEMBER VLAHOS: I wasn't sure whether you 6 implied in your question that those are words of the 7 Commission or simply words describing the argument of 8 EAL. I wasn't sure. 9 MR. CAMPBELL: I am sorry, I thought I tried 10 to make it clear, but I obviously wasn't clear enough in 11 introducing the quote. The quotes in this section are 12 the view of the proponent, the applicant. I think it 13 is, however, important and that's why I started at the 14 end with page 215: 15 "It is important to recognize that the 16 views of the applicant around this 17 business of embedded costs were accepted 18 by the Board in terms of the method of 19 addressing those problems." (As read) 20 MEMBER VLAHOS: That's where I am not entirely 21 clear as to whether you think that this sentence is a 22 finding of the Commission or is simply a continuation of 23 the position of EAL? 24 MR. CAMPBELL: It is clearly, at the excerpt 25 you are referring to, the position of the applicant and 26 the Board here is explaining what the position of the 27 applicant was. It is not until the later segment that 28 the Board reaches its conclusion, but, yes, what is Les Services StenoTran Services Inc. 613-521-0703 653 OHNC PANEL 1, cr-ex (Campbell) 1 being put out here is a description of the position of 2 the applicant, absolutely. 3 MEMBER VLAHOS: That clarifies it. 4 MR. CAMPBELL: Earlier today you discussed 5 possible benefits that generators could provide. You 6 discussed those with Mr. Poch. I think you were talking 7 about things like frequency control and so on. Do you 8 recall that? 9 MR. CURTIS: Yes, I do. 10 MR. CAMPBELL: Would you agree with me that 11 these benefits are provided by merchant generators as 12 well? 13 MR. CURTIS: That is correct. 14 MR. CAMPBELL: And they are not in any way 15 limited to embedded generation? 16 MR. CURTIS: That is correct. 17 MR. CAMPBELL: In fact, wouldn't it be the 18 case that since merchant generation is not so closely 19 associated with the fluctuations of a particular load, 20 merchant generation may be even more effective than 21 embedded generation in supplying these benefits? 22 MR. CURTIS: It may be but you also have to 23 take into account the size of the generation unit that 24 you are looking at and the amount that you are 25 looking at. 26 MR. CAMPBELL: Now, I would then ask you to 27 turn up Exhibit D-5-2, page 6. 28 MR. CURTIS: Yes. Les Services StenoTran Services Inc. 613-521-0703 654 OHNC PANEL 1, cr-ex (Campbell) 1 --- Pause 2 MR. CAMPBELL: Now, lawyers doing arithmetic 3 is always a dangerous thing, but I am going to try and 4 take you through what I understand your arithmetic to be 5 here. That heading on D-5-2, page 6 of 7, called 6 "Other LDCs". 7 MR. CURTIS: Yes. 8 MR. CAMPBELL: As I understand its use on this 9 table it includes your distribution company. It 10 includes OHNCD, as it is referred to here? 11 MR. CURTIS: Yes, it would. 12 MR. CAMPBELL: If that is so, I don't 13 understand how you can just add, as was suggested to 14 you, I believe, by Mr. Poch, how is it that you can just 15 add the percentages on Exhibit B-4-3, page 8 of 13, that 16 you were referred to. If you can turn that up I will 17 direct you right to the other one. 18 MR. CURTIS: Yes, sir. 19 MR. CAMPBELL: At the bottom of that page 8 of 20 13 you were taken to the heading "LDCs Large, Medium and 21 Small" for the discussion of some of those percentages? 22 MR. CURTIS: Yes. 23 MR. CAMPBELL: As I understand it, the LDCs 24 there are less OHNCD. That is shown in the heading. 25 MR. CURTIS: That is correct. 26 MR. CAMPBELL: So if I understand this 27 correctly, it would not be correct, as was suggested to 28 you, that you can just add the impact on this table with Les Services StenoTran Services Inc. 613-521-0703 655 OHNC PANEL 1, cr-ex (Campbell) 1 the row for small customers from Exhibit B-4-3, page 8, 2 from that same exhibit? You just can't add those rows 3 together? 4 MR. CURTIS: Yes, that was a caution I think I 5 was making to Mr. Poch in terms of being able to just 6 add numbers together on these two tables. 7 MR. CAMPBELL: But certainly, you can't add it 8 to Exhibit B-5-2, page 6 of 7, because you are adding 9 one set of numbers that include your distribution 10 company to one set of numbers that doesn't, and that 11 would be incorrect? 12 MR. CURTIS: That would be incorrect, yes, 13 overall. 14 I think directionally I was talking Mr. Poch's 15 line of questioning to focus in on the advantages to the 16 small LDCs. Maybe directionally it would be 17 appropriate, but you certainly just can't add the two 18 numbers together on a table and expect to come up with 19 the right number. 20 MR. CAMPBELL: But isn't it also correct, Mr. 21 Curtis, looking at D-4-3, page 8 of 13, that even 22 directionally the rate increases being experienced by 23 the OHNC distribution company are more than offset by 24 the decreases -- let me back up because I do want the 25 transcript to read marginally legibly -- am I not 26 correct that the rate increases for your distribution 27 company more than offset the decreases to the LDCs, 28 other than your distribution company? Les Services StenoTran Services Inc. 613-521-0703 656 OHNC PANEL 1, cr-ex (Campbell) 1 MR. CURTIS: Yes, that is correct. 2 MR. CAMPBELL: It is quarter to. 3 THE PRESIDING MEMBER: Okay. 4 We will come back at two o'clock, please. We 5 will resume Mr. Campbell. Thank you. 6 --- Upon recessing at 1245 7 --- Upon resuming at 1405 8 THE PRESIDING MEMBER: Okay. Are we ready to 9 resume, Mr. Campbell? 10 MR. CAMPBELL: Thank you, Mr. Chairman. I 11 don't think I will be much longer. 12 But gentlemen, first, if I could ask you to go 13 to Interrogatory E-8-19 and the attachment to that 14 interrogatory, please? 15 --- Pause 16 MR. CURTIS: Yes. 17 MR. CAMPBELL: Do you have the attachment, 18 Mr. Curtis? 19 MR. CURTIS: Yes. 20 MR. CAMPBELL: Now, what we received in that 21 interrogatory answer was -- 22 THE PRESIDING MEMBER: Could you please give 23 us the interrogatory? We have got the volume now. 24 Please. 25 MR. CAMPBELL: Eight. 26 THE PRESIDING MEMBER: Could you just give us 27 what the interrogatory number is, please? 28 MR. CAMPBELL: E-8-19. Les Services StenoTran Services Inc. 613-521-0703 657 OHNC PANEL 1, cr-ex (Campbell) 1 THE PRESIDING MEMBER: Nineteen, thank you. 2 MR. CAMPBELL: E-8-19, and it is the 3 attachment to that interrogatory. 4 THE PRESIDING MEMBER: Okay. We are ready. 5 MR. CAMPBELL: Now, that table gives 6 capacities added -- I think the question is over the 7 last 10 years -- for each of two areas in the province, 8 the GTA area and eastern Ontario. Is that correct? 9 MR. CURTIS: Yes, it is. 10 MR. CAMPBELL: What it is showing there in the 11 right-hand column is the effective capacity added? 12 MR. CURTIS: Yes, it is. 13 MR. CAMPBELL: It was mentioned last week that 14 the load meeting capability of a system can vary with 15 system conditions. I believe you agreed with that 16 proposition at some point last week. I can't remember 17 exactly who with. 18 MR. CURTIS: Yes. 19 MR. CAMPBELL: Now, would I be correct that 20 what is shown here under the "Effective Capacity Added" 21 is what you see as the maximum possible capability of -- 22 dealing first with the GTA facilities -- as being the 23 total shown, which is 6,150 megawatts. Correct? 24 MR. CURTIS: In terms of these capacity 25 additions, yes, that's correct. 26 MR. CAMPBELL: In contrast to that figure, 27 what would be the most conservative estimate of the 28 additional load meeting capability for the GTA Les Services StenoTran Services Inc. 613-521-0703 658 OHNC PANEL 1, cr-ex (Campbell) 1 facilities shown? 2 MR. CURTIS: It would be lowered by the amount 3 of required to meet a double contingency in the GTA 4 area. 5 MR. PORAY: I think if we are looking in terms 6 of the capacity that is added in there it will probably 7 not be unreasonable to assume that the capacity of the 8 lines comes from item no. 1, item no. 3, item no. 4 and 9 item no. 6. If those were added together that would 10 probably not be an unreasonable estimate of the load 11 meeting capability that is required. 12 MR. CAMPBELL: If I add them together what do 13 I get, about -- 14 MR. PORAY: Hang on for a second. I will do 15 that addition. 16 --- Pause 17 MR. PORAY: 4,650 MVA. 18 MR. CAMPBELL: So that would be what you would 19 see as the most conservative estimate of the load 20 meeting capability for those GTA facilities shown? 21 MR. PORAY: I think that as a high-level 22 estimate, yes. 23 MR. CAMPBELL: By a high-level estimate we are 24 back to Mr. Poch's decimal points again? 25 MR. PORAY: Yes. 26 MR. CAMPBELL: This is a reasonable figure to 27 use for the most conservative estimate of that load 28 meeting capability? Les Services StenoTran Services Inc. 613-521-0703 659 OHNC PANEL 1, cr-ex (Campbell) 1 MR. PORAY: Yes. 2 MR. CAMPBELL: Turning then to the eastern 3 Ontario facilities, again we have a total there shown on 4 the table of about 4,300. In contrast, again, what 5 would you see as being a good estimate of the most 6 reasonable or the most conservative additional load 7 meeting capability for the eastern Ontario group of 8 facilities? 9 MR. PORAY: I think in a similar manner I 10 would take the element No. 1 and element No. 3 and add 11 those two together to obtain a total of 2,800 MVA. 12 MR. CAMPBELL: Gentlemen, then, just to finish 13 up, in your direct -- I guess I'm going to finish up 14 with kind of where we started -- in your direct, on the 15 net/gross issue, you described the parties' positions on 16 both sides of the issue as follows -- and I think I have 17 the quote directly from the transcript -- that, "These 18 groups have been adamant about maintaining their 19 positions." Do you recall making that statement? 20 MR. CURTIS: Yes, I do. 21 MR. CAMPBELL: Earlier today you told me it 22 was made on both sides of the question. 23 MR. CURTIS: Yes, it was. 24 MR. CAMPBELL: Would you agree with me that 25 there is at least one party who has argued one side of 26 that position through the stakeholdering but in this 27 proceeding has moved off the position that it has taken, 28 and isn't that party OPG in putting forward its phase Les Services StenoTran Services Inc. 613-521-0703 660 OHNC PANEL 1, cr-ex (Campbell) 1 out from gross to net proposal? Isn't that a 2 significant compromise? 3 MR. POCH: Mr. Chairman, I think he is 4 inviting the witness to comment on how people have moved 5 or not moved through the settlement process, and I think 6 it is quite improper for the witnesses to be asked -- 7 MR. CAMPBELL: With respect, Mr. Chairman, I 8 didn't mention the settlement process at all. I said 9 the stakeholdering process, and I think my friend 10 Mr. Curtis has testified that parties have been adamant 11 through the stakeholdering process and through these 12 proceedings. What I'm suggesting is that there is one 13 party who has proposed to compromise, OPG. 14 MR. CURTIS: The OPGI proposal is a 15 modification, certainly, from what it put forward in the 16 stakeholder process. And it does move from the pure 17 gross position that we saw OPG coming up with in the 18 initial phases of the stakeholdering to a position that 19 is between gross and net, yes. 20 MR. CAMPBELL: Thank you, Mr. Chairman, those 21 are my questions. 22 THE PRESIDING MEMBER: Thank you, 23 Mr. Campbell. 24 Mr. Klippenstein, you are next. Thank you. 25 MR. KLIPPENSTEIN: Thank you, Mr. Chairman. 26 CROSS-EXAMINATION 27 MR. KLIPPENSTEIN: Mr. Chairman and Members of 28 the Panel, I represent Pollution Probe, which is one of Les Services StenoTran Services Inc. 613-521-0703 661 OHNC PANEL 1, cr-ex (Klippenstein) 1 the parties who has advocated a net load billing 2 framework in this process because of the public health 3 and environmental benefits that Pollution Probe 4 perceives, and I guess, therefore, I'm one of the 5 parties who Mr. Campbell fears -- based on his comments 6 this morning -- wants to basically burn him at the 7 stake, but I assure him that is not the case. 8 I would like to begin by asking some questions 9 on the principle of user-pay and its applicability with 10 respect to the net load billing and gross load billing 11 issue. 12 You began in your direct evidence, at page 54 13 of the transcript, I believe, and also at page 276, by 14 talking about the different positions that have just 15 been alluded to by the different parties, and you 16 mentioned that when there was a reference to 17 "principles", that parties tended to sometimes use one 18 principle for opposite sides of the issue. Do you 19 recall that discussion? 20 MR. CURTIS: Yes, I do. 21 MR. KLIPPENSTEIN: And one of the principles 22 you specifically referred to was the user-pay principle. 23 Do you remember that? 24 MR. CURTIS: Yes, I do. 25 MR. KLIPPENSTEIN: And you mentioned that it 26 would take the wisdom of Solomon to try and sort out 27 that kind of debate. Do you remember that? 28 MR. CURTIS: Yes, I do. Les Services StenoTran Services Inc. 613-521-0703 662 OHNC PANEL 1, cr-ex (Klippenstein) 1 MR. KLIPPENSTEIN: I wonder if I could just 2 comment on that issue of the wisdom of Solomon as a way 3 of prefacing my questions. I don't know if you remember 4 the story of Solomon in the bible. Do you recall that 5 in that instance in the bible story there were two 6 women, both claiming to be the mother of one infant and 7 the problem was brought before wise King Solomon. Do 8 you remember that part of the story? 9 MR. CURTIS: Yes, I do. 10 MR. KLIPPENSTEIN: And he said, "Give me a 11 sword" and he raised the sword and said, "I am going to 12 cut this baby in half and divy it up between the two of 13 you." Do you remember that? 14 MR. CURTIS: Yes, I do. 15 MR. KLIPPENSTEIN: I'm not sure this is your 16 area of expertise, but -- 17 --- Laughter 18 MR. CURTIS: No, it is not my area of 19 expertise. I will assure you of that. 20 MR. KLIPPENSTEIN: And the response of one of 21 the women was, "Don't do it. Give it to the other 22 woman", and Solomon said, "Aha, I now know the right 23 answer and I'm going to give the baby to the woman who 24 said give it to the other woman." 25 So the point of the story I think is that 26 sometimes it is not necessary to saw it off or come down 27 the middle but it is possible to find the right or the 28 better answer. Is that fair? Les Services StenoTran Services Inc. 613-521-0703 663 OHNC PANEL 1, cr-ex (Klippenstein) 1 --- Laughter 2 MR. CURTIS: I don't know how I could comment 3 on that. 4 --- Laughter 5 MR. KLIPPENSTEIN: Anyway, I won't -- I'm 6 sorry. Did you have an answer to that? 7 MR. CURTIS: No, I don't have an answer to 8 that. I'm sorry. 9 MR. KLIPPENSTEIN: The reason I raise that is 10 to preface my questions because I am wondering if it is 11 possible for us to be a little bit -- to clarify the 12 issue a little bit for the assistance of the Board in 13 terms of what the user-pay principle means and might 14 illuminate here. 15 Is it fair to say that in general the user-pay 16 principle refers to payment which is a function of the 17 amount of use? 18 MR. CURTIS: Again, one side, one body of 19 proponents have used that as the basis for arguing it, 20 yes. 21 MR. KLIPPENSTEIN: And the way that this 22 issue, the principle, is also used in this debate is 23 with respect to certain past facilities that are or were 24 created for the benefit of certain parties, and the 25 question of whether those parties should pay for those 26 or contribute to those facilities, and then the other 27 side of the debate, as you say also, refers to the 28 user-pay principle. Is that right? Les Services StenoTran Services Inc. 613-521-0703 664 OHNC PANEL 1, cr-ex (Klippenstein) 1 MR. CURTIS: That's correct, yes. 2 MR. KLIPPENSTEIN: And one of your key 3 concerns here, as you have said many times, is the 4 question of equity in the distribution of those past 5 costs. Is that fair? 6 MR. CURTIS: Yes, it is. 7 MR. KLIPPENSTEIN: I'm wondering whether it is 8 not more accurate to say that whether you view that 9 issue as one of equity or something else it is not a 10 question of parties paying for the use of something, it 11 is, at heart, a question of parties paying for something 12 they are not using and whether that may or may not raise 13 equity considerations, it is a question of parties 14 paying for something essentially they do not intend to 15 use. Is that fair? 16 MR. CURTIS: I think you are recasting the 17 user-pay principle into an equity principle. Again, 18 what we heard through the stakeholdering process was the 19 two sides of that argument. The one side would argue 20 that they shouldn't, on an equity basis, have to pay for 21 assets that they are not using, and the other side would 22 argue that, on an equity basis, they shouldn't have to 23 pay for assets that are not being used by the proponents 24 of the other side of the argument in terms of a cost 25 shifting that would occur. 26 MR. KLIPPENSTEIN: I don't mean to suggest 27 that there is no equity principles at stake here. I 28 would hope I'm not suggesting that the two should be Les Services StenoTran Services Inc. 613-521-0703 665 OHNC PANEL 1, cr-ex (Klippenstein) 1 confused. What I'm asking you is whether the question 2 of facilities which were built for the purpose of a 3 particular party but are not being used by the party 4 would rather be subject to questions of equity rather 5 than a principle of user pay. 6 MR. CURTIS: I guess I would go back and argue 7 that both sides have equal claim to that equity position 8 as well. 9 MR. KLIPPENSTEIN: That may be, but let me set 10 aside the equity issues for now and again look at the 11 user-pay idea. Would you agree with me that the focus 12 of the user-pay principle is on use? 13 MR. PORAY: Maybe I can jump in here. We have 14 heard on a number of occasions throughout these 15 proceedings that the costs associated with providing a 16 transmission infrastructure are independent of the way 17 it is used. Once the transmission structure has been 18 put in place, and it was put in place for customers who 19 are connected to that infrastructure, irrespective of 20 whether a customer actually uses that infrastructure or 21 not, those costs still remain. 22 So, from the perspective of user pay, I'm 23 looking at that infrastructure was provided for the 24 users of the transmission system and the use they are 25 making is the fact that they are connected to it. The 26 actual volume of traffic that comes through it does not 27 influence the cost. 28 MR. KLIPPENSTEIN: Again, let me separate out Les Services StenoTran Services Inc. 613-521-0703 666 OHNC PANEL 1, cr-ex (Klippenstein) 1 the idea of the purpose for which it was built and the 2 use made of it. Would you agree with me those are two 3 separate ideas? 4 MR. PORAY: I don't think they are. 5 MR. KLIPPENSTEIN: No? 6 MR. PORAY: I think the fact that a 7 transmission infrastructure was put in place for 8 customers that are connected to it, they may or may not 9 use it. 10 MR. KLIPPENSTEIN: Well, I think in the 11 comment you have just made, you have made a distinction 12 between the purpose for which it was built and the use 13 of which it is being made. 14 MR. ROGERS: Excuse me. He hasn't. That's 15 the problem, Mr. Chairman, he has not. He refuses to 16 accept that. Rightly or wrongly, that's his position. 17 MR. KLIPPENSTEIN: Would you agree with me 18 that facilities which were built for the purposes of a 19 particular load, that load is not -- then decides not to 20 use that any more at all, that that load should still 21 pay for part of that? 22 MR. PORAY: The network facilities, the meshed 23 interconnected transmission system in Ontario was not 24 built for the specific purpose of one customer, but for 25 all customers connected to that system. That's the 26 definition of the functionality of the network. 27 MR. KLIPPENSTEIN: So any of those customers 28 for whom that facility was built should pay for it even Les Services StenoTran Services Inc. 613-521-0703 667 OHNC PANEL 1, cr-ex (Klippenstein) 1 if that customer decides to not use it at all. Is that 2 right? 3 MR. PORAY: We view that as an obligation. 4 Yes. 5 MR. KLIPPENSTEIN: Right. And you view that 6 obligation quite independent of the fact that the user 7 is not using it at all. 8 MR. PORAY: Well, if the user is not using -- 9 I'm sorry, as long as the user remains connected to the 10 transmission system, they are in fact a user of that 11 system. 12 MR. KLIPPENSTEIN: My question was slightly 13 different. If a customer is one of those for whom the 14 overall facility was originally built, but then that 15 user does not use that facility at all, I take it your 16 position is that that user should still pay part of it. 17 MR. PORAY: May I just ask for a point of 18 clarification? If that user remaining connected to the 19 system or do they disconnect from the system? 20 MR. KLIPPENSTEIN: Disconnect. 21 MR. PORAY: Our view is that that customer had 22 an obligation and, before disconnecting from the system, 23 they would still be required to pay for some portion of 24 those costs, as we have noticed in other jurisdictions. 25 MR. KLIPPENSTEIN: So that obligation is 26 totally independent of actual use. 27 MR. CURTIS: Again, I guess we are getting 28 back to this connection with actual use. The system Les Services StenoTran Services Inc. 613-521-0703 668 OHNC PANEL 1, cr-ex (Klippenstein) 1 infrastructure is put in place to serve initially 2 specified requirements. Whether or not the customer 3 actually chooses to use it after that, that doesn't in 4 our mind relieve that customer of the obligation to pay 5 for those assets. 6 The consequence, of course, is if a customer 7 is relieved of all or any portion of that is those costs 8 have to be shifted to other customers and recovered from 9 them. 10 MR. KLIPPENSTEIN: Yes. I think I understand 11 your answer being the same as what Dr. Poray has said. 12 Maybe I should just clarify. So you would agree that a 13 customer who was one of those for whom the facility was 14 built, but then who decides to no longer use the 15 facility at all and is totally disconnected from that 16 facility, should still pay for it partly. 17 MR. CURTIS: There should be some partial 18 payment for it, yes, at least. 19 MR. KLIPPENSTEIN: And would you agree with me 20 that that is what might sort of be called an equitable 21 obligation or an obligation of equity? 22 MR. CURTIS: From various perspectives, yes. 23 I think the problem we were having with your example is 24 that we don't have any actual instances of a customer 25 choosing to disconnect from the system after installing 26 generation. There may in fact be, but I don' t think 27 either of us are aware of any actual examples of that 28 happening. Les Services StenoTran Services Inc. 613-521-0703 669 OHNC PANEL 1, cr-ex (Klippenstein) 1 MR. KLIPPENSTEIN: That may be, but just so I 2 can fully understand, I think you are agreeing that such 3 a party or customer has an obligation based on equity, 4 even though that hypothetical customer has absolutely no 5 use of the facility any more. 6 MR. CURTIS: Since the facility, and I think 7 we are again talking largely in terms of connection 8 facilities here, since that facility was originally put 9 in place for that customer, that customer would have 10 that obligation, yes. 11 MR. KLIPPENSTEIN: And that arises from the 12 purpose of the facility, not the actual use because I 13 have said this particular party is not in fact making 14 any use of it and is not connected any more. 15 MR. CURTIS: Yes. 16 MR. KLIPPENSTEIN: What I would suggest to 17 you, based on this example and this principle and the 18 principle of equity and fairness, what I would suggest 19 to you is that that principle that is at work here is 20 not user pay, but is a principle based on equity and 21 fairness about the purpose originally of the facility. 22 Would you say that's fair? 23 MR. CURTIS: I guess to get back to our 24 original point, we started off talking about user pay as 25 an example. I think the way we have stated it in terms 26 of our direct evidence still holds. 27 You have talked about principle around equity. 28 That could also be a principle that -- as a matter of Les Services StenoTran Services Inc. 613-521-0703 670 OHNC PANEL 1, cr-ex (Klippenstein) 1 fact, it has been brought up by various stakeholders in 2 the course of our stakeholdering. 3 Again, on the basis of equity, we have heard 4 it expressed by both sides of the net versus gross 5 debate and characterized to support the side of the 6 argument that they have been on. 7 MR. KLIPPENSTEIN: I can understand that 8 stakeholders might have called on the principle for 9 various purposes, but my suggestion to you based on the 10 discussion we have had is that it is perhaps most useful 11 for the Board to think about this as a question of 12 equity and fairness and not in fact, when one thinks 13 about it, as a question of the user pay principle. 14 Would you say that's fair? 15 MR. CURTIS: I guess what I was trying to do 16 was reflect what stakeholders have brought to us in 17 terms of principles. I'm not sure that I would have a 18 view in terms of whether it should be interpreted based 19 on the user pay principle or on equity and fairness. I 20 think all of them are equally applicable. 21 MR. KLIPPENSTEIN: Isn't one of the functions 22 of the user pay principle to increase economic 23 efficiency by gauging -- by connecting actual use and 24 payment on an ongoing basis? 25 MR. CURTIS: I don't believe it was ever 26 expressed to us that way in terms of the stakeholdering. 27 It didn't get into the economic theory that may be 28 behind that principle. Les Services StenoTran Services Inc. 613-521-0703 671 OHNC PANEL 1, cr-ex (Klippenstein) 1 MR. KLIPPENSTEIN: Are you taking the position 2 before the Board that you don't know or don't take a 3 position about whether the user pay principle applies 4 here? 5 MR. CURTIS: No. We have taken a position 6 that the user pay principle applies here. 7 MR. KLIPPENSTEIN: Okay. 8 MR. CURTIS: It's just that we have had the 9 user pay principle interpreted to us by stakeholders and 10 it has been interpreted in a manner that's different, 11 depending on whether that stakeholder happened to be on 12 the net or the gross side. 13 MR. KLIPPENSTEIN: Is it your view that the 14 user pay principle has or can apply to a situation where 15 there is no actual use of any kind? 16 MR. CURTIS: Again, reflecting what some of 17 the stakeholders have told us, yes, that's correct. 18 MR. KLIPPENSTEIN: I'm sorry to interrupt, but 19 I'm not asking what position the stakeholders took 20 necessarily, I'm asking you in your judgment whether you 21 think the user-pay principle would apply in a situation 22 where there is no use of any kind? 23 MR. ROGERS: Excuse me, could I just interrupt 24 here, Mr. Chairman/ 25 By "use" the question, I assume, includes 26 connection to the system? 27 MR. KLIPPENSTEIN: I said no use of any kind. 28 MR. ROGERS: No, but they have said that Les Services StenoTran Services Inc. 613-521-0703 672 OHNC PANEL 1, cr-ex (Klippenstein) 1 connection to the system is use to the system and that's 2 an important distinction that they are trying to draw 3 for you, that -- 4 MR. KLIPPENSTEIN: That's fine. I'm 5 continuing that. 6 MR. ROGERS: -- whether you have any electrons 7 flowing through that or not is use. I just want to be 8 clear as to what your question is, but I think that is 9 how these witnesses are interpreting it. 10 MR. KLIPPENSTEIN: As my question was 11 intended, is it your position that the user-pay 12 principle applies even when there is no use of the 13 facility, including no physical connection? Do you 14 still say the user-pay principle applies? 15 MR. CURTIS: I think you are taking it to an 16 ultimate extreme, and I guess as we talked about 17 earlier, I can't think of any example where a customer 18 has chosen to disconnect from the system. So it's a 19 little difficult to see how your interpretation of the 20 principle can be applied, then, within the situation we 21 have within Ontario. 22 In all other circumstances, the customer has 23 remained connected to the system and under that 24 condition we would say that, yes, they still have an 25 obligation. 26 MR. KLIPPENSTEIN: What I'm trying to do is 27 understand how the principle might apply to this 28 situation and if you don't think it is useful to clarify Les Services StenoTran Services Inc. 613-521-0703 673 OHNC PANEL 1, cr-ex (Klippenstein) 1 that then so be it. I'm wondering whether it is useful, 2 in fact for the Board, to clarify that a little. 3 Now, you have suggested there is no example of 4 the question or situation which I put to you and 5 therefore it is not useful. Let me suggest to you it 6 may be useful and I would put it to you for your 7 consideration once again. 8 So we can understand how the user-pay 9 principle might apply or might not apply in this 10 situation, would it be your view, apart from whatever 11 stakeholders might say, that a situation where a user is 12 not using facilities in any way, including not being 13 hooked up to them, even though the facilities were 14 originally built partly for use by such customers as 15 this particular party, would you agree that that is not 16 an example of the user pay principle? 17 MR. CURTIS: Well, again I guess what we are 18 struggling with is there are two definitions of 19 "user-pay principle" that are on the table here. 20 Under one definition of the user-pay principle 21 you are quite right but, on the other -- with the other 22 definition of the user-pay principle that customer would 23 still have the obligation to pay. 24 MR. KLIPPENSTEIN: Which of those two 25 definitions do you think is the better one? 26 MR. CURTIS: Our belief is that both of them 27 apply. There has to be -- this is really what we were 28 trying to bring out in terms of the direct evidence, is Les Services StenoTran Services Inc. 613-521-0703 674 OHNC PANEL 1, cr-ex (Klippenstein) 1 that we have sets of principles here that do not 2 uniquely define what the answer is, or what the correct 3 direction is, and that is because there are competing 4 definitions for that principle which, certainly from the 5 stakeholders perspective, are valid. 6 So if you have two valid definitions of a 7 principle being brought forward that do not uniquely 8 point to what the answer is, then you are left wrestling 9 with which one -- how it should be interpreted. That is 10 the position I think we are trying to reflect here. 11 MR. KLIPPENSTEIN: All right. One final 12 question, or I hope it's a final question on this topic. 13 You have said, and I quote, that your belief 14 is that both of these definitions apply, including the 15 definition of user-pay such that a party who makes no 16 use whatsoever of the facility should pay for it. 17 My suggestion to you is that it would be a 18 little more sensible and a little more helpful if we 19 looked at the situation and said actually that is not a 20 case of the user-pay principle but it certainly might be 21 a case of equity and fairness given the original 22 purposes of the facility. Would you agree with me that 23 that might be a slightly -- that might be a step forward 24 in understanding the principles that apply here? 25 MR. CURTIS: Well, again, reflecting what 26 happened in the stakeholder process you would then get 27 the other side arguing their interpretation of what the 28 equity and fairness principle is. So I think we would Les Services StenoTran Services Inc. 613-521-0703 675 OHNC PANEL 1, cr-ex (Klippenstein) 1 end up back in about the same position, where we have 2 two principles that have competing definitions, 3 depending on the side that you are supporting. 4 MR. KLIPPENSTEIN: So we cut the baby in half, 5 is that it? 6 MR. CURTIS: Well, I'm not suggesting we are 7 cutting a baby in half here, what I'm trying to reflect 8 is what we heard when we went out and listened to our 9 stakeholders. These were the interpretations that were 10 brought to us. 11 MR. ROGERS: It's joint custody. 12 --- Laugher 13 --- Pause 14 MR. KLIPPENSTEIN: Would you agree that under 15 gross load billing a party's bill is not only a function 16 of the amount of transmission service the party uses, 17 but also a function of the amount of self-generation the 18 party has? 19 MR. CURTIS: Under gross load? 20 MR. KLIPPENSTEIN: Yes. 21 MR. PORAY: I'm sorry, can -- 22 MR. CURTIS: I don't think -- can you repeat 23 that again? 24 MR. KLIPPENSTEIN: Yes, certainly. Certainly. 25 MR. CURTIS: It sounds incorrect. 26 MR. KLIPPENSTEIN: Oh, okay. 27 Under gross load billing a party's bill is not 28 only a function of the amount of transmission service Les Services StenoTran Services Inc. 613-521-0703 676 OHNC PANEL 1, cr-ex (Klippenstein) 1 the party uses, but also a function of the amount of 2 self-generation the party has, or embedded generation? 3 MR. CURTIS: On our definition of gross load 4 billing it is the sum of the two meters. It is the sum 5 of what the load customer is taking off the transmission 6 system, plus the sum of the -- adding into it the meter 7 reading supplying that load customer. 8 So if that is what you are saying, then yes. 9 MR. KLIPPENSTEIN: Thank you. 10 I would like to ask questions -- actually, 11 just one question on the relationship of the proposal to 12 the status quo. 13 I know this has been touched on by various 14 parties. I won't go into it other than I hope to just 15 ask this one question. 16 Are you aware of any companies presently which 17 pay a transmission charge that is a function of their 18 amount of embedded generation? 19 MR. CURTIS: In Ontario? 20 MR. KLIPPENSTEIN: Yes. 21 --- Pause 22 MR. CURTIS: I guess in terms of the evidence 23 that we have submitted we have talked about the existing 24 contracts and the existing customers and they would 25 pay -- at least our interpretation, because these 26 contracts are being grandfathered as per our suggestion 27 in our proposal -- they would be paying on a net basis 28 for their requirement. So they would not be paying for Les Services StenoTran Services Inc. 613-521-0703 677 OHNC PANEL 1, cr-ex (Klippenstein) 1 the output of their generator in terms of how the bill 2 would be calculated. 3 MR. KLIPPENSTEIN: I would like to ask a 4 number of questions about the benefits of the 5 anticipated new generation and I would like to begin by 6 just getting clarification on some of the discussion of 7 Friday. I think it's found at page 430 of the 8 transcript, which unfortunately I don't have readily 9 available. 10 I think there was discussion about whether 11 there would be a different amount of new generation 12 anticipated between the two scenarios, net load billing 13 and gross load billing. 14 I wonder if you can tell me whether it is your 15 position or your assumption or working belief that there 16 would be different amounts of embedded generation as we 17 look down the future, depending on whether it's a gross 18 load billing or a net load billing scenario? 19 MR. CURTIS: This is with respect to the 20 installation of new embedded generation? 21 MR. KLIPPENSTEIN: Yes. 22 MR. CURTIS: We really don't have a position 23 in terms of how much embedded generation would or would 24 not be installed, depending on what the resolution of 25 the net versus gross load issue is. 26 MR. KLIPPENSTEIN: Have you done projections 27 or estimates for the two scenarios or do you rely on 28 projections or estimates for the two scenarios? Les Services StenoTran Services Inc. 613-521-0703 678 OHNC PANEL 1, cr-ex (Klippenstein) 1 MR. CURTIS: No. 2 MR. KLIPPENSTEIN: Thank you for that 3 clarification. 4 I wonder if I could ask you to turn to a table 5 from your evidence and I have provided to you earlier 6 copies of the material I intend to rely on and have also 7 prepared, Mr. Chairman, a little collection called 8 "Pollution Probe Cross-examination Documents, Reference 9 Book" which I provided to my friend. 10 MS LEA: Can we give this Exhibit No. G4.2 11 please, "Pollution Probe Cross-examination References". 12 EXHIBIT NO. G4.2: Document entitled 13 "Pollution Probe Cross-examination 14 References" 15 MR. KLIPPENSTEIN: I made a whole bunch 16 available on the side and they seem to be gone. I have 17 only a few more left and once there is enough for other 18 parties and unless there is some objection I would 19 propose that these -- they are not anything particularly 20 new and it's just compiled for convenience. I would 21 propose they be entered as an exhibit for convenience. 22 MS LEA: Exhibit G4.2 23 MR. KLIPPENSTEIN: Do you have a copy of that? 24 MR. CURTIS: Yes, we do. 25 MR. PORAY: Yes. 26 MR. KLIPPENSTEIN: If you could turn to, and I 27 am sorry those pages should be numbered but aren't. 28 It's Table 2, which is a reproduction of the evidence Les Services StenoTran Services Inc. 613-521-0703 679 OHNC PANEL 1, cr-ex (Klippenstein) 1 from Exhibit D, Tab 5, Schedule 2, page 3 of 7. 2 MR. CURTIS: Yes. 3 MR. KLIPPENSTEIN: Do you see that? 4 MR. CURTIS: Yes. 5 MR. KLIPPENSTEIN: Can I take it from that 6 that according to the medium forecast which you have 7 produced in the background studies, you are assuming, 8 let us say, 1,950 megawatts of new gas fired embedded 9 generation to be built in Ontario between 2000 and 2008, 10 which is a total of the 1,150 and the 800. Is that 11 accurate? 12 MR. CURTIS: I guess with the consideration 13 that existing generation being reconnected may also 14 involve some gas fired as well, but apart from that, 15 yes. 16 MR. KLIPPENSTEIN: I will use the 1950 figure 17 for convenience. Perhaps it may be then a conservative 18 figure. 19 MR. CURTIS: All right. 20 MR. KLIPPENSTEIN: Now, that figure of new 21 anticipated gas fired generation or embedded generation 22 over the next eight years is the subject of evidence 23 filed by Pollution Probe in Mr. Jack Gibbons' report, 24 which is Exhibit H, Tab 2, Schedule 1 and which I have 25 included in this Pollution Probe documents reference 26 book. I wonder if you could turn to page 5 of 27 Mr. Gibbons' evidence? 28 MR. CURTIS: Yes. Les Services StenoTran Services Inc. 613-521-0703 680 OHNC PANEL 1, cr-ex (Klippenstein) 1 MR. KLIPPENSTEIN: This page includes Table 2, 2 which purports to be a review of the annual net emission 3 reduction benefits of the 1,950 megawatts of new gas 4 fired generation anticipated, as a percentage of Ontario 5 Power Generation's 1998 emissions. Do you see that? 6 MR. CURTIS: I see that, yes. 7 MR. KLIPPENSTEIN: Do you believe that these 8 are reasonable estimates? 9 MR. CURTIS: I have no basis for knowing that. 10 MR. KLIPPENSTEIN: All right. 11 MR. CURTIS: These are related to the 12 commodity side of the business. 13 MR. KLIPPENSTEIN: Would you agree, based on 14 your knowledge or based on Mr. Gibbons' reports or other 15 information that you may have available to you that the 16 companies that build the anticipated 1,950 megawatts of 17 new gas-fired generation will be providing a significant 18 public health and environmental benefit for the people 19 of Ontario? 20 MR. CURTIS: I think only from the perspective 21 of the efficiency requirement that we have laid out in 22 our proposal. That's what we understand in terms of how 23 stakeholders have positioned it to us. 24 MR. KLIPPENSTEIN: I'm not quite sure I 25 understand that. Would you agree that the 1,950 26 megawatts will produce a reduction in various emission 27 overall? 28 MR. CURTIS: This is a bit of a circular Les Services StenoTran Services Inc. 613-521-0703 681 OHNC PANEL 1, cr-ex (Klippenstein) 1 discussion. During our stakeholder process we are 2 approached by various groups that represented 3 environmental concerns. Upon their urgings we 4 considered applying an efficiency requirement as far as 5 the embedded generation and it was their assertion to us 6 that this would result in emission reductions, but we 7 have no basis of knowing whether or not that will take 8 place. 9 MR. KLIPPENSTEIN: Do you deny that it will 10 take place? 11 MR. CURTIS: I can neither confirm nor deny. 12 I don't know. 13 MR. KLIPPENSTEIN: Would you agree that the 14 new gas fired generation as anticipated in the 15 projection filed by your company will in fact reduce 16 emissions -- will it displace other generation which 17 would have more emissions, without talking about 18 quantities, but talking about directionality now? 19 MR. CURTIS: The problem that we have is that 20 it is going to be the IMO that is going to administer 21 the electricity marketplace and they are the ones that 22 will dispatch the system. 23 If they end up dispatching generation that 24 emits at a lower level then emissions would be reduced, 25 but we are not in a position to know how the IMO is 26 going to dispatch the system. That's going to depend on 27 the bids that they receive. It is going to be the 28 marketplace that determines whether or not emissions go Les Services StenoTran Services Inc. 613-521-0703 682 OHNC PANEL 1, cr-ex (Klippenstein) 1 down. 2 MR. KLIPPENSTEIN: So you simply don't take a 3 position on whether or not the projected new gas fired 4 generation will have a beneficial reduction in emissions 5 effect? 6 MR. CURTIS: We don't know. We are not in a 7 position to know one way or the other. 8 MR. KLIPPENSTEIN: So you are putting a 9 proposal to the Board that takes this into account when 10 you really have no idea whether there is anything to it? 11 MR. CURTIS: What we are trying to do again is 12 reflect what some stakeholders have told us, and so 13 again that's an effort to try and balance off concerns 14 that have been expressed to us. 15 MR. PORAY: May I interject here and perhaps 16 add something. Our proposal does not attempt to 17 forecast what new generation will come about into the 18 province. What our proposal tries to do is to address 19 the issue of the bypass of transmission charges and we 20 use the services of a renowned consultant to try and 21 give us an estimate of what the potential for new 22 generation might be, but that is not to say that that 23 generation will in fact come about. 24 MR. KLIPPENSTEIN: Are you suggesting you 25 don't know whether or not it will exist, or you don't 26 know whether or not it will reduce emissions? 27 MR. PORAY: As I said, the purpose of this 28 evaluation was to get an estimate of the potential for Les Services StenoTran Services Inc. 613-521-0703 683 OHNC PANEL 1, cr-ex (Klippenstein) 1 new generation that would have an impact on the bypass 2 of transmission charges. Whether that generation will 3 actually materialize or not will depend really on the 4 marketplace. It is not for us to forecast what new 5 generation will come about. 6 MR. KLIPPENSTEIN: And if it doesn't appear 7 then it won't cause any revenue shifts, I take it? 8 MR. PORAY: If there is no new generation, 9 then the potential for revenue shift will be minimized. 10 MR. KLIPPENSTEIN: So in that sense there 11 wouldn't be a problem from net load billing? 12 MR. PORAY: I think the problem always exists. 13 The potential for new generation and bypass of charges 14 will exist whether the generation materializes or not. 15 That's why we will bring it forward to have it addressed 16 here. 17 What level of new generation will come about 18 within the next 10 years, we are not in a position to 19 forecast that. 20 MR. KLIPPENSTEIN: A moment's indulgence, 21 Mr. Chairman. 22 --- Pause 23 MR. KLIPPENSTEIN: All right. Thank you. 24 If I could now turn to the question of the 25 relationship or conjunction or correlation between net 26 load billing and rates. If you could turn to, again, 27 Mr. Gibbons' evidence, and page 7 of that evidence, 28 Table 3 which is a forecast aggregate transmission rate Les Services StenoTran Services Inc. 613-521-0703 684 OHNC PANEL 1, cr-ex (Klippenstein) 1 selection from 2000-2008. Do you see that? 2 MR. CURTIS: Yes, we do. 3 MR. KLIPPENSTEIN: That table shows that if 4 OHNC sticks with 100 per cent net load billing for the 5 transmission end connection rates and if the 1,950 6 megawatts of new embedded generation that is positive in 7 the evidence is billed, the aggregate transmission rates 8 will actually fall by 11 per cent in real, as opposed to 9 nominal, terms. First of all, is that your 10 understanding of the table and do you agree or disagree 11 with that calculation? 12 MR. CURTIS: That is our understanding of the 13 way the evidence has been put forward, but we don't have 14 the details to know how it was calculated. 15 I think we were talking about earlier just 16 discounting. It may not be appropriate. There has to 17 be an escalation rate in terms of being able to 18 calculate what the real dollars are and the evidence 19 didn't provide what the escalation rate was. Our 20 interpretation was that it was just taken as the nominal 21 dollars and then discounted back. But again, I guess we 22 didn't have the information in terms of how the 23 calculation was actually performed. 24 MR. KLIPPENSTEIN: If you look at the top of 25 page 7, the second sentence says: 26 "Table 3 uses the Conference Board of 27 Canada's Consumer Price Index forecast 28 for Ontario to convert OHNC's nominal Les Services StenoTran Services Inc. 613-521-0703 685 OHNC PANEL 1, cr-ex (Klippenstein) 1 dollar transmission rate forecast into 2 constant 1992 dollars." (As read) 3 Would you agree that is a reasonable way to go 4 about changing from nominal to real dollars to see the 5 increase or decrease? 6 MR. CURTIS: Well, again, we don't really 7 understand how the calculation was done. Were these 8 values just used in order to discount the nominal 9 dollars that we put forward? 10 MR. KLIPPENSTEIN: Should I answer that under 11 oath? 12 MR. CURTIS: Well, you are asking me whether 13 or not the calculation is correct, and I don't know the 14 answer to that because I don't know what the details -- 15 how it was calculated. 16 MR. ROGERS: Can I suggest we wait until 17 Mr. Gibbons comes, Mr. Chairman, and then we will find 18 out? 19 THE PRESIDING MEMBER: Yes, I think that is 20 going to have to wait. 21 MR. KLIPPENSTEIN: Okay. Thank you. 22 I am just wondering whether -- are you 23 suggesting that there is a correct and an incorrect way 24 to use the Consumer Price Index to make that transition 25 and you can't tell me which of those two were used here? 26 Or is it a methodological question which has no impact 27 on the reasonableness of this calculation? 28 MR. CURTIS: No, it would have a definite Les Services StenoTran Services Inc. 613-521-0703 686 OHNC PANEL 1, cr-ex (Klippenstein) 1 impact on the reasonableness of the calculation, 2 depending on how it was applied. 3 MR. KLIPPENSTEIN: And the conversion that you 4 mentioned, would you consider that reasonable or not 5 reasonable -- when you asked me the method. 6 MR. CURTIS: I was just trying to confirm how 7 the calculation was done. Since this is being applied 8 to a specific company, OHNC, there probably are better 9 ways of doing that calculation than basing it on some 10 aggregate consumer price index forecast in order to do 11 that calculation. 12 MR. KLIPPENSTEIN: Would you be able to 13 undertake to provide to me OHNC's calculation of a 14 reasonable conversion from nominal to real dollars 15 equivalent to Table 3? 16 MR. CURTIS: I think we would like to see how 17 this one was done first, though. 18 MR. KLIPPENSTEIN: I am asking you to 19 undertake to do it yourself. It seems to me it is 20 probably not difficult at all. That would benefit us 21 and the Board by giving what you consider to be an 22 actual and reasonable calculation. 23 So I wonder if you could undertake to do that? 24 MR. ROGERS: No, we won't willingly undertake 25 to do that, Mr. Chairman. 26 I mean, I don't know what the purpose is even 27 and whether -- there is a lot for these people to do. I 28 don't want to be difficult, but I don't want them to go Les Services StenoTran Services Inc. 613-521-0703 687 OHNC PANEL 1, cr-ex (Klippenstein) 1 off on a wild goose chase. 2 THE PRESIDING MEMBER: I think the only thing 3 that would be helpful for the Board is to be able to 4 compare for the year 2000 on, 2000 to 2008, the OHNC 5 forecast. I think they have told us what they did in 6 terms of the escalation rate that they have used from 7 2000 to 2008. Correct? 8 MR. CURTIS: It is done in nominal dollars, 9 yes. 10 THE PRESIDING MEMBER: In nominal dollars? 11 MR. CURTIS: Yes. 12 THE PRESIDING MEMBER: Okay. So then that is 13 in evidence. That is their proposal. 14 I guess to compare yours with their nominal 15 dollar forecast then this would be -- your expert or 16 experts would have to do an apples to apples comparison. 17 That is how I would view it. 18 MR. KLIPPENSTEIN: I think if I might clarify 19 what Pollution Probe is getting at is the question of 20 whether the real rates is as useful as nominal rates. 21 There is different ways to calculate that, and it 22 doesn't mean we have to have an apple and an orange and 23 try to turn them into some combined fruit. So my 24 undertaking was whatever they think OHNC thinks is a 25 reasonable way to do that would be useful to have on the 26 record, it seems to me. 27 It seems like to convert the nominal to real, 28 however they think best, would in my submission, be Les Services StenoTran Services Inc. 613-521-0703 688 OHNC PANEL 1, cr-ex (Klippenstein) 1 useful for the Board to know because the members of the 2 public are going to be experiencing real rates just as 3 much as nominal rates. If they want to disagree on 4 methodology I don't suggest that -- 5 THE PRESIDING MEMBER: Your specific request, 6 then, is for them to take -- we will take it under one 7 scenario, maybe, to convert the nominal dollars to real 8 dollars on a forecast basis that they would wish to use 9 for the basis of that purpose. In other words, let them 10 decide whether it is CPI or whatever index they would 11 use in order to convert? 12 MR. KLIPPENSTEIN: That is fair in my 13 submission. 14 THE PRESIDING MEMBER: Just a minute. 15 --- Pause 16 THE PRESIDING MEMBER: Okay. 17 Can I address you, Mr. Rogers, and can we 18 address, then, Table 6, Exhibit D, Tab 5, Schedule 2, 19 page 7 of 7. 20 --- Pause 21 THE PRESIDING MEMBER: I think that is what I 22 interpret to be your preferred proposal, and that shows 23 what the rates in your nominal dollars would be. Is 24 that correct? 25 MR. ROGERS: Yes, sir, I believe that is 26 correct. 27 THE PRESIDING MEMBER: If not for this purpose 28 but there are, as you would know, other evidence from Les Services StenoTran Services Inc. 613-521-0703 689 OHNC PANEL 1, cr-ex (Klippenstein) 1 AMPCO from Energy Link and so on that have -- 2 MR. ROGERS: Yes. 3 THE PRESIDING MEMBER: Can you take under 4 advisement whether you can prepare this column again in 5 real dollars, your assumption regarding what the 6 inflator would be, et cetera? 7 MR. ROGERS: Yes, sir. 8 THE PRESIDING MEMBER: So we will take it on a 9 best efforts basis to get back to us whether you are 10 able to, for this option 4C, which is the preferred, to 11 provide the forecast in real dollars and you pick what 12 the inflator would be and so on for that. That, then, 13 would be in real dollars your base scenario, should we 14 say. Is that correct? 15 MR. ROGERS: Yes. I believe it is right. 16 Mr. Curtis, do you think that is correct? 17 MR. CURTIS: Yes. Yes. 18 MR. ROGERS: We can do that, I think. Let us 19 take it under advisement. I think we can do that. If 20 we can we will. 21 THE PRESIDING MEMBER: Okay. So then we will 22 have, in your real dollar terms, this base-line scenario 23 which can then be compared by others to other scenarios. 24 Okay? That is the idea. 25 MR. ROGERS: Very good. 26 THE PRESIDING MEMBER: It might be useful to 27 have that. We don't know until we see where the other 28 evidence goes, so we will ask for that undertaking. Les Services StenoTran Services Inc. 613-521-0703 690 OHNC PANEL 1, cr-ex (Klippenstein) 1 MS LEA: Undertaking 4.2, please, F4.2. 2 UNDERTAKING NO. F4.2: Mr. Rogers 3 undertakes, on a best efforts basis, to 4 advise whether it is possible to provide 5 the forecast for all options in Table 6, 6 Exhibit D, Tab 5, Schedule 2, page 7 7 of 7, in real dollars including inflator, 8 et cetera 9 MR. KLIPPENSTEIN: Mr. Chairman, as I 10 understand your suggestion, it pertained to Option 4C 11 and I wonder if that could also be done for Option 1, 12 because that is the option that Pollution Probe dealt 13 with in Mr. Gibbons' evidence -- Option 1 being the last 14 column of Table 6. 15 THE PRESIDING MEMBER: I would suspect there 16 is not much difference because, you know, the numbers 17 will be different of course, but in terms of just 18 applying the escalator, it would be equally -- why don't 19 we leave it, then -- since Mr. Klippenstein has 20 requested that, why don't you provide it for the four 21 scenarios under here. Once you have the base-line 22 escalator it is only a calculative punch every time, you 23 know. Okay? 24 MR. ROGERS: If I could take it under 25 advisement. I will let the Board know tomorrow. 26 THE PRESIDING MEMBER: Yes. Okay. We will 27 keep it within that. So it is slightly modified, but it 28 is the same undertaking. Les Services StenoTran Services Inc. 613-521-0703 691 OHNC PANEL 1, cr-ex (Klippenstein) 1 MR. KLIPPENSTEIN: I will make myself 2 available to do the actual calculations, if that is 3 helpful. 4 THE PRESIDING MEMBER: We will lend you a 5 calculator. 6 MR. KLIPPENSTEIN: If I could, then, ask you a 7 number of questions about Table 5 and Table 6, Table 5 8 being of course -- this has often been referred to -- 9 Exhibit D, Tab 5, Schedule 2, page 6 of 7, and Table 6 10 being Exhibit D, Tab 5, Schedule 2, page 7 of 7. 11 Is it fair to say, Mr. Curtis, that Table 6 is 12 a description of the forecast rate, in other words, 13 dollars per kilowatt month? 14 MR. CURTIS: In nominal terms. 15 MR. KLIPPENSTEIN: In nominal terms. It is a 16 rate. 17 MR. CURTIS: Yes. 18 MR. KLIPPENSTEIN: Is it fair to say that 19 Table 5 differs in that Table 5 is not a forecast of 20 rates, but a forecast of the overall charges or bills, 21 if you will, that customers will pay? 22 MR. CURTIS: It is the percentage change in 23 the transmission payments, if you will, from customers, 24 yes. It is a reflection of the shifting that would 25 occur as a result of the embedded generation forecast. 26 MR. KLIPPENSTEIN: So Table 6 is per-unit 27 rates, Table 5 is total charge. Correct? 28 MR. CURTIS: No, it's a percentage change. Les Services StenoTran Services Inc. 613-521-0703 692 OHNC PANEL 1, cr-ex (Klippenstein) 1 MR. KLIPPENSTEIN: It is a percentage change 2 in the total charge? 3 MR. CURTIS: Transmission charge. 4 MR. KLIPPENSTEIN: Total transmission charge. 5 Correct? 6 MR. CURTIS: Yes. 7 MR. KLIPPENSTEIN: So they are quite different 8 in that way in terms of what they measure. Is that 9 fair? 10 MR. CURTIS: Yes. 11 MR. KLIPPENSTEIN: If I look at Table 5, then, 12 and look in the heading above the four columns on the 13 right, the heading says, quote, "Average Percentage 14 Change in Aggregate Transmission Charges in Year 2008". 15 Now, can you clarify for me, is that the 16 change in the year 2008 or is that the change over the 17 course of the eight years? 18 MR. CURTIS: No. It is what it says. It is 19 in 2008. It is the cumulative effect of embedded 20 generation being installed. Then you reach year 2008 21 and what you see there are the percentage changes that 22 you would have noted in 2008 or forecasted for 2008. 23 MR. KLIPPENSTEIN: I see. So that the figure 24 that has received a lot of attention in the first box 25 under the "Other LDCs", the figure 12.7 per cent is the 26 increase from 2000 until 2008. Is that fair? 27 MR. CURTIS: No. 28 MR. KLIPPENSTEIN: No? Les Services StenoTran Services Inc. 613-521-0703 693 OHNC PANEL 1, cr-ex (Klippenstein) 1 MR. CURTIS: No. If you look at the year 2 2008, it is what the percentage change would be to other 3 LDCs as a result of the embedded generation that has 4 occurred up to 2008 in comparison with the case where 5 there have been no new embedded generation. So it is 6 looking at just what happened in 2008. 7 MR. KLIPPENSTEIN: I see. 8 So it is not a chronological comparison over 9 time, it is a lateral comparison, if you will? 10 MR. CURTIS: That's correct. Yes. 11 MR. KLIPPENSTEIN: So, for example, it is 12 possible for the other LDC category to actually be lower 13 than it was in 2000 even though it may be higher by 12.7 14 per cent with the lateral comparison or lateral 15 scenario. 16 MR. CURTIS: Yes. 17 MR. KLIPPENSTEIN: Though we can't tell from 18 Table 5 whether the position is above or below what we 19 are today in terms of charges. 20 MR. CURTIS: Well, the direction is correct. 21 It is not going to be below. The best it could be is 22 the same as today, but the direction going from today 23 forward to 2008, as indicated by the plus or the minus, 24 if you will, in the table for the various groupings. 25 MR. KLIPPENSTEIN: Is it, in your view, 26 possible that in real terms as opposed to nominal terms 27 a 100 per cent net load billing scenario with 1,950 28 megawatts of new embedded generation will still result Les Services StenoTran Services Inc. 613-521-0703 694 OHNC PANEL 1, cr-ex (Klippenstein) 1 in lower aggregate transmission rates than the present? 2 MR. CURTIS: I think one of the complications 3 in this is that you have a lot of other assumptions that 4 have to remain the same. When we were doing this 5 assessment, one of the reasons why we brought it forward 6 in terms of nominal dollars, we were assuming that the 7 eleven sixty-three, the total revenue requirement for 8 the transmission system, applied equally throughout the 9 years. 10 Whenever you start going in -- and I'm 11 assuming that is the basis that we are going to 12 investigate whether or not we can do that undertaking 13 that we just did -- the problem, obviously, when you 14 start getting into a real basis for economic analysis, 15 some of these other assumptions might not necessarily be 16 the ones that should remain within the analysis. 17 I'm just finding it difficult if we are going 18 to switch over to a real based economic analysis to be 19 able to project what the outcome might be as far as that 20 analysis is concerned. 21 For example, in your question, are you 22 assuming everything else would remain the way it was 23 done in terms of the original analysis? 24 MR. KLIPPENSTEIN: Yes. Make those 25 assumptions. Everything else remains the same. So we 26 now have 1,950 megawatts of new embedded generation and 27 we now change the figures from -- the dollar figures 28 from nominal to real. I see Dr. Poray has a question. Les Services StenoTran Services Inc. 613-521-0703 695 OHNC PANEL 1, cr-ex (Klippenstein) 1 MR. PORAY: I just want to clarify. When you 2 say 1,950, in our evaluation we used all of the 3 generation that was going to come online, including the 4 reconnection. Are you saying now that you want a 5 different evaluation? 6 MR. KLIPPENSTEIN: My questions pertain to two 7 of the three categories on the table and use that figure 8 of 1,950 megawatts which I identified earlier to you on 9 your table. 10 MR. CURTIS: None of our analysis has used 11 that number. The number that we have used in terms of 12 assumed and that of generation has been either the 1,150 13 or the 2,550 megawatts. 14 MR. KLIPPENSTEIN: Okay. Let's stick with 15 your 2,550 as in the table. 16 MR. PORAY: In that case we are not -- the 17 only comparison that we would be looking at would be 18 either 2(a) or 2(b) or 2(c) because those are the ones 19 that -- and 1, I guess. Sorry. So 1, 2(a), 2(b) and 20 2(c). 21 MR. KLIPPENSTEIN: I think the simplest way to 22 do this, and it is in fact very simple, believe it or 23 not, is to look at table 6, the 100 per cent net load 24 billing option, which is option one on the right hand 25 side. Would you agree with me that in real terms under 26 those assumptions, which are your assumptions, rates 27 will decrease in real terms? You haven't done the 28 calculations yet, but do you think that's possible or Les Services StenoTran Services Inc. 613-521-0703 696 OHNC PANEL 1, cr-ex (Klippenstein) 1 likely? 2 MR. PORAY: I don't know. We will have to 3 wait for the calculations. 4 MR. KLIPPENSTEIN: Okay. Would you agree with 5 me, just looking at those numbers, -- 6 MR. PORAY: Which numbers are we looking at? 7 MR. KLIPPENSTEIN: The ones I just mentioned. 8 Table 6, the last column. All it would take would be an 9 inflation factor of, let's say, between one and a half 10 and two per cent and the result would be a decrease or 11 the same level in real terms? Can you agree with me 12 that that's the range we are talking about? 13 MR. CURTIS: You are going to combine the 14 inflator and the deflator in terms of this. If what you 15 are asking is the comparison from 2008 back to 2000, you 16 know, the order of increase in percentage terms over 17 that period, divided by the number of years that we are 18 looking at, the numbers that you quoted are certainly in 19 the realm of making that stream of numbers go down, but 20 that means you are taking the combined effect of the 21 escalator and the deflator into account in order to 22 produce that result. 23 MR. KLIPPENSTEIN: My question is -- 24 MR. CURTIS: And until we have done the 25 calculation, like we don't know what the result will be. 26 MR. KLIPPENSTEIN: My question is simply this: 27 Assume inflation of 1.5 per cent per year beginning now 28 and going for eight years, would you agree with me that Les Services StenoTran Services Inc. 613-521-0703 697 OHNC PANEL 1, cr-ex (Klippenstein) 1 the numbers in the last column on table 6 are likely to 2 show no real increase or perhaps a decrease? If that's 3 the ball park we are talking about, would you agree? 4 MR. CURTIS: You haven't told us what the 5 deflator is. Are you using the inflation rate as the 6 deflator in the MPV calculation? 7 MR. KLIPPENSTEIN: Yes. 8 MR. CURTIS: Then what are you using as the 9 inflator then in that? 10 MR. KLIPPENSTEIN: I'm saying the only thing 11 that changes is an assumption to an inflation rate of 12 1.5 per cent. 13 MR. CURTIS: It would be an unusual way of 14 doing that sort of calculation. It wouldn't be the way 15 that we will be bringing back. 16 MR. ROGERS: Wait a minute. May I suggest 17 let's wait until we see what we can do on the basis 18 of -- 19 THE PRESIDING MEMBER: That's the only way. 20 Asking for an opinion what a result will be at this 21 point is probably not a good idea. When the 22 undertaking, if it is carried out, comes back, then you 23 would have an opportunity to question them about the 24 assumptions at that time. To ask for an opinion as you 25 are is not appropriate until they have done the 26 calculation. 27 MR. KLIPPENSTEIN: Thank you, Mr. Chairman. 28 A question about the justification process Les Services StenoTran Services Inc. 613-521-0703 698 OHNC PANEL 1, cr-ex (Klippenstein) 1 that OHNC went through. You have mentioned many, many 2 times -- I don't mean that pejoratively -- the company's 3 concern about equity or distribution of some costs, if 4 you will. 5 Did you when you considered that question of 6 fairness and public benefit also consider the emissions 7 reductions in terms of air toxics or greenhouse gases 8 that would also be a public benefit that would be 9 affected by the net load/gross load question? 10 MR. CURTIS: No, we did not. As I said 11 before, that's a commodity side. We aren't in a 12 position of knowing how much of that may or may not 13 occur. 14 MR. KLIPPENSTEIN: Okay. And do you rely on 15 the Market Design Committee's report at all in its 16 discussion and recommendation of gross load billing as a 17 grounds for your own position? 18 MR. PORAY: I think what we have done is we 19 have tried to accommodate the various stakeholders' 20 positions within -- expressed to us within the process 21 to try and come up with a balanced perspective. 22 MR. KLIPPENSTEIN: I'm not quite sure to what 23 extent that answers the question about the role of the 24 MDC's report in your calculations. 25 MR. PORAY: I can perhaps clarify that in our 26 original filing in December 1998. We came forward with 27 gross load billing and more or less using the Market 28 Design Committee recommendations. We were invited to go Les Services StenoTran Services Inc. 613-521-0703 699 OHNC PANEL 1, cr-ex (Klippenstein) 1 back to first principles and to stakeholder, the rate 2 design and the cost allocation, and that is exactly what 3 we have done. This submission is the result of that 4 process that we have been through. 5 MR. KLIPPENSTEIN: The Market Design 6 Committee, and I won't get into it in detail now because 7 we may not need to, but the Market Design Committee, I 8 would suggest to you, had an overall package that linked 9 gross load billing and various other components, 10 including some specific environmental recommendations, 11 including emissions caps. 12 Do you rely on the Market Design Committee's 13 gross load billing recommendation at all before this 14 Board and obviously if so, I have questions pertaining 15 to the other half of the coin pertaining to the 16 committee's environmental recommendations. 17 MR. PORAY: I think, as I said, we are 18 cognizant of what the Market Design Committee 19 recommended in its final report and we have come some 20 way away from that as part of the stakeholder 21 consultation process to design a rate which is 22 recognized as the various perspectives of the 23 stakeholders that we talked with. 24 MR. KLIPPENSTEIN: Is there anything in your 25 proposal that links to the environmental aspect of the 26 Design Committee's recommendation about emissions caps? 27 Is there anything in your proposal that 28 responds to the recommendation of the Committee on Les Services StenoTran Services Inc. 613-521-0703 700 OHNC PANEL 1, cr-ex (Klippenstein) 1 emissions caps? 2 MR. PORAY: I wasn't aware that there was a 3 linkage between the recommendations of the Market Design 4 Committee in terms of the transmission rate design and 5 gross load billing. This focuses purely -- this 6 submission focuses purely on transmission rate design. 7 MR. KLIPPENSTEIN: Would you agree with me 8 that to the event that the Market Design Committee 9 linked parts of its report, including gross load billing 10 and environmental protection measures, that should be 11 taken into account when gross load billing structures 12 are considered in this context? 13 MR. PORAY: As I say, I don't see the linkage 14 in the Market Design Committee report between gross load 15 billing and the environmental issues that you are 16 raising. 17 MR. KLIPPENSTEIN: Take Exhibit G4.2, which 18 are the Pollution Probe documents, and turn to the last 19 page of that report. The last full paragraph of that 20 page says: 21 "We understand that the government will 22 be reviewing options for regulating 23 emissions from the electricity sector. 24 In our view, an air emissions cap and 25 trade program should be launched at the 26 same time as the electricity market is 27 opened to competition. Public acceptance 28 of the electricity restructuring Les Services StenoTran Services Inc. 613-521-0703 701 OHNC PANEL 1, cr-ex (Klippenstein) 1 initiative is tied intimately to the 2 adoption of measures to control power 3 plant emissions and to other protect and 4 improve the environment." (As read) 5 You will note that the preceding paragraph 6 specifies 12 recommendations on the environment in the 7 Committee's previous report. Do you see that paragraph 8 and that linkage? 9 MR. PORAY: I see that, yes. 10 MR. KLIPPENSTEIN: Would you agree that the 11 Committee is linking the other parts of its report to 12 environmental cap and trade measures? 13 MR. PORAY: Not in the context of setting the 14 transmission rights and gross load billings? 15 MR. KLIPPENSTEIN: So, in your view, when the 16 Committee says that a cap program should be launched at 17 the same time as the electricity market is opened, it's 18 not linking the two? It's not linking -- 19 MR. PORAY: No, it is not. There are many 20 other recommendations which the Market Design Committee 21 made and it's not linked. I don't see that linkage. 22 MR. KLIPPENSTEIN: Would you agree that the 23 Design Committee's report attempted to integrate a 24 variety of economic public interest and environmental 25 considerations into the market structure? 26 MR. PORAY: I would agree that the Market 27 Design Committee's report addressed a number of issues 28 that should be looked at in relation to opening up the Les Services StenoTran Services Inc. 613-521-0703 702 OHNC PANEL 1, cr-ex (Klippenstein) 1 market, but I don't see the linkages that you are trying 2 to establish. 3 MR. KLIPPENSTEIN: So you take the view that 4 it is consistent with the Market Design Committee's 5 report to adopt its gross load billing recommendation, 6 but not adopt its cap and trade emissions program? 7 MR. PORAY: I think these are two separate 8 issues. 9 MR. KLIPPENSTEIN: All right. 10 MR. CURTIS: Just to point out, we didn't 11 adopt the Market Design Committee's gross load option in 12 our proposal. 13 MR. KLIPPENSTEIN: All right. Thank you, 14 members of the panel. 15 Thank you, Mr. Chairman and Members of the 16 Panel. 17 Those are all my questions. 18 THE PRESIDING MEMBER: We will take the 19 afternoon break now. 20 Just to give people a heads up, Board Staff 21 Counsel will not be available tomorrow so we will have 22 to schedule Board Staff Counsel when we return from the 23 break. I don't know whether that will be for the 24 balance of the afternoon or not, but it could be. 25 Therefore, we will have to carry on with the 26 other intervenor questions, if not completely today, 27 starting again tomorrow morning. So that is just a 28 heads up where we are going. Les Services StenoTran Services Inc. 613-521-0703 703 1 Okay. Thank you. 2 We had better say 10 minutes to 4:00. 3 Thank you. 4 --- Upon recessing at 1530 5 --- Upon resuming at 1553 6 THE PRESIDING MEMBER: As I said, we are going 7 to pass on to Board Staff Counsel for the questions from 8 Board Staff. 9 Please proceed, Ms Lea. 10 MS LEA: Thank you. 11 I would like to thank my friends, who I spoke 12 to yesterday, and the Board for accommodating my 13 schedule and letting me jump the queue. 14 I will also be asking questions this afternoon 15 on behalf of the Consumers Association of Canada. 16 FURTHER EXAMINATION 17 MS LEA: Gentlemen, I have a few questions 18 about several issues, so pardon me if this jumps around 19 a bit, but I have a little bit to cover on a lot of 20 little things. 21 Beginning with a point made by both IPPSO and 22 AMPCO in their prefiled evidence and, in part, also in 23 their examination of you. 24 You did not include the transmission cost 25 savings resulting from NUG project development in your 26 studies for this rates case. Is that the case? 27 MR. CURTIS: It's not germane, I don't think, 28 to this. These contracts were existing contracts and it Les Services StenoTran Services Inc. 613-521-0703 704 OHNC PANEL 1, ex (Lea) 1 would fall under what we are proposing as far as the 2 existing contracts are concerned. 3 MS LEA: I was wondering whether one of the 4 reasons why you did not do that analysis was that it 5 related to an answer you gave earlier to one of my 6 friends that in general there is no benefit to the 7 overall transmission system, or let's say that it would 8 be very small benefit to the overall transmission system 9 resulting from these projects. Is that true. 10 MR. CURTIS: Well, these projects were put in 11 place under Ontario Hydro and under an existing 12 infrastructure that was put in place. So it's not -- 13 MS LEA: I guess I'm talking about new ones, 14 the possibility of new ones. 15 MR. CURTIS: Oh, new ones. 16 MS LEA: Yes. I should have made myself 17 clear. 18 MR. CURTIS: Okay. I'm sorry. 19 Could you rephrase that, given the 20 clarification? 21 MS LEA: Yes. I gather that you did not 22 quantify what benefits or cost savings there might be to 23 the transmission system from new generation projects in 24 your analysis. Is that true? 25 MR. CURTIS: No. We were talking, again, 26 about recovering for the existing infrastructure in 27 terms of the discussions that we have had around the net 28 versus gross load billing issue. Les Services StenoTran Services Inc. 613-521-0703 705 OHNC PANEL 1, ex (Lea) 1 MS LEA: What about for embedded generation 2 projects? 3 MR. CURTIS: The embedded generation projects 4 are reflected in our evidence in the table I think that 5 we have been referring to several times over the course 6 of the past few days. The table in Exhibit D, Tab 5, 7 Schedule 2, the various tables in those. 8 MS LEA: Let's have a look at that. Could you 9 repeat that reference, please? 10 MR. CURTIS: Exhibit D, Tab 5 -- 11 MS LEA: Tab 5, Schedule 2. 12 MR. CURTIS: -- Schedule 2. Specifically we 13 have talked a great deal around Table 5 and Table 6 and 14 both of those refer to the cases -- a comparison -- I'm 15 sorry, refer to cases where embedded generation has been 16 included. 17 --- Pause 18 MS LEA: Perhaps I can just make myself more 19 clear by referring to the actual quote that I was 20 looking at. 21 I guess what I'm trying to get at -- and you 22 are not understanding what I'm asking and I'm not making 23 myself clear -- is the transmission cost savings that 24 might result from new embedded generation projects. I 25 need to understand whether you think there would be any 26 savings to the transmission or not from new embedded 27 generation project? 28 MR. CURTIS: To try to put that clear -- Les Services StenoTran Services Inc. 613-521-0703 706 OHNC PANEL 1, ex (Lea) 1 MS LEA: Yes. 2 MR. CURTIS: -- what we have looked at is on a 3 going-forward basis if there is a need for new 4 transmission infrastructure one of the ways of 5 mitigating that may be to install new generation. So 6 that is what we have looked at in terms of a 7 going-forward basis in terms of trying to meet new load. 8 MS LEA: Well, has that consideration been 9 included in the calculations that you have put forward 10 in these tables? 11 MR. CURTIS: Not in these tables because these 12 tables refer just to the existing transmission 13 infrastructure, not -- 14 MS LEA: I understand. So that's where my 15 confusion arose. 16 MR. CURTIS: -- in the new transmission. 17 MS LEA: Where in the evidence do we see that 18 factor reflected? 19 MR. CURTIS: We have talked about that in 20 terms of our recommendation around the charging for a 21 new connection to meet -- for new load and also for new 22 generation coming in. 23 MS LEA: So that's an issue 7 item, if I can 24 put it that way? 25 MR. CURTIS: Yes. 26 MS LEA: Thank you for that clarification. 27 Turning to a question about generation 28 efficiency. You have proposed certain transmission Les Services StenoTran Services Inc. 613-521-0703 707 OHNC PANEL 1, ex (Lea) 1 tariffs for embedded generation on two parameters, old 2 and new, and also there is an efficiency criterion. Is 3 that correct? 4 MR. CURTIS: Yes, there is an efficiency 5 criteria. 6 MR. PORAY: Just a clarification, these are 7 not charges to generators. These are charges to load. 8 MS LEA: Yes, I understand. Thank you. 9 How did you establish the criteria to 10 differentiate between different types of embedded 11 generation?z 12 MR. CURTIS: In terms of the efficiency 13 standards? 14 MS LEA: Yes. Let's work with efficiency 15 please. 16 MR. CURTIS: All right. 17 We made reference to the Revenue Canada 18 standards, the 43.1, and that -- 19 MS LEA: In the Tax Act? 20 MR. CURTIS: In the Tax Act and that detailed, 21 at least from their perspective, what an efficient 22 generator was. We felt that would be a fairly objective 23 standard to at least take as a jumping off point for 24 planning efficiencies. 25 MS LEA: And did you make any modifications to 26 those standards? 27 MR. CURTIS: Yes, I think we have outlined -- 28 I think if you refer to Exhibit D, Tab 5, Schedule 1, Les Services StenoTran Services Inc. 613-521-0703 708 OHNC PANEL 1, ex (Lea) 1 page 7. 2 MS LEA: Yes. 3 MR. CURTIS: The hydro-electric generation -- 4 MS LEA: Yes. 5 MR. CURTIS: -- is a fuller, a more inclusive 6 description than what's in the Income Tax Act and the 7 waste fuel and biomass generation is the other. 8 MS LEA: I understand that there were other 9 factors besides merely efficiency that you looked at. 10 If we look at your answer to Exhibit E, Tab 1, Schedule 11 44, which was a Board staff interrogatory No. 44 and 12 that's Exhibit E, Tab 1, Schedule 44, this interrogatory 13 asks you why standard combined cycle systems were 14 excluded from the efficient generation list when it is 15 generally acknowledged that they are one of the most 16 efficient forms of generation. 17 Your answer suggests that large cost 18 reassignments was a factor. Can you elaborate on the 19 answer you gave in this interrogatory please? 20 MR. CURTIS: You mean in terms of the larger 21 cost reassignment? 22 MS LEA: I guess I am trying to understand why 23 you excluded standard combined cycle systems. 24 MR. CURTIS: I guess what we were looking at 25 in that respect is the size of the units and the amount 26 of megawatts that could potentially be displaced by 27 putting units of that size in service. 28 MS LEA: And what result would that lead to? Les Services StenoTran Services Inc. 613-521-0703 709 OHNC PANEL 1, ex (Lea) 1 MR. CURTIS: In terms of our proposal it would 2 lead to more costs that would be bypassed as part of the 3 billing option that we put forward to resolve the net 4 versus gross on network charges. 5 MS LEA: Do you think, though, that the choice 6 of excluding these types of systems is consistent with 7 using efficiency as a criterion? 8 MR. CURTIS: Efficiency tends to be in the 9 eyes of the beholder and this is at the lower end, if 10 you will, of the efficiency level that is in the list 11 that we have outlined as meeting the requirements under 12 what we have defined as efficient generation. So, it's 13 a matter of where you want to draw the line, basically. 14 MS LEA: Are you concerned about some 15 stakeholders viewing where you drew the line, I suppose, 16 to use your words, as being arbitrary, that there will 17 be customers that are disadvantaged within an industry 18 because of where the line was drawn here? 19 MR. CURTIS: I don't know that it's a question 20 of disadvantaged specific industries in terms of where 21 the line is drawn. If you are picking a standard around 22 efficiency, there has to be a line drawn in terms of 23 what you consider to be efficient and what you don't 24 consider to be efficient. 25 MS LEA: All right. I think I understand your 26 position then. 27 I wonder if we could look at a couple of other 28 interrogatories which are somewhat related to this Les Services StenoTran Services Inc. 613-521-0703 710 OHNC PANEL 1, ex (Lea) 1 topic, still in Board staff section, Exhibit E, Tab 1. 2 Could we have a look at Schedule 62 and 64. 3 Gentlemen, was it you that prepared the answer 4 to Interrogatory No. 62 from Board staff? 5 MR. CURTIS: Are you talking about us 6 personally? 7 MS LEA: Well, you supervised the answering of 8 this interrogatory. 9 MR. CURTIS: Yes. 10 MS LEA: I didn't know if it was a legal 11 answer or a policy answer. 12 MR. CURTIS: No, it is not a legal answer. 13 MS LEA: Okay. 14 I was not aware that the Board under section 15 92 or that section 92 required the Board to make any 16 determination whether a project was efficient or 17 otherwise. I wasn't even sure how a generator might be 18 making a section 92 application in some circumstances. 19 Can you elaborate on the answer that is given in 20 Interrogatory No. 62? 21 MR. CURTIS: Certainly. The generator would 22 be making the application, in all likelihood, under 23 section 92. Section 92, as you may recall, refers to a 24 leave to construct for constructing either transmission 25 or distribution facilities. 26 In order to put an embedded generator into 27 service, it will require a transmission or a 28 distribution connection facility to be installed. Our Les Services StenoTran Services Inc. 613-521-0703 711 OHNC PANEL 1, ex (Lea) 1 understanding of the Act is at the moment there are no 2 exemptions in terms of a requirement to have a granting 3 of leave to construct of any such facilities. 4 What we were looking for in terms of 5 responding to this interrogatory is a convenient way, an 6 objective way, if you will, that would be seen to be 7 objective by all parties in terms of determining whether 8 or not the generator was efficient. 9 And so as part of the leave to construct what 10 we were suggesting is that the determination of whether 11 or not the generator was efficient or not could be done 12 under that as well. 13 MS LEA: I see. So, in its application if it 14 was going to build a transmission or distribution line, 15 a generator, in your view, should include evidence about 16 its level of efficiency and the Board should make a 17 determination of that level of efficiency? 18 MR. CURTIS: This is a possible mechanism. 19 Again, I think what we were being asked under this 20 interrogatory was how that could be implemented and this 21 is a way that we are proposing in terms of the 22 implementation. It's not the only way. 23 MS LEA: What are other ways? There doesn't 24 seem to be much authority under section 92 for the Board 25 to do that. It might be a factor depending on various 26 directions we might receive, but what other ways could 27 there be to do it? 28 MR. CURTIS: The other way that probably would Les Services StenoTran Services Inc. 613-521-0703 712 OHNC PANEL 1, ex (Lea) 1 be more expedient would be under the conclusion of a 2 transmission connection agreement with the connection, 3 the transmitter, and under that if the standard for 4 efficiency is set up on a fairly objective basis then 5 there would be essentially a declaration as part of the 6 connection agreement that this was an efficient 7 generator. 8 MS LEA: And who would be making the actual 9 declaration? 10 MR. CURTIS: The load to which that generator 11 was attached. 12 MS LEA: And you would either accept or reject 13 that? 14 MR. CURTIS: Yes. 15 MS LEA: Similarly, in Schedule 62, Question 16 62 then, I think you are referring to the Ontario Energy 17 Board again when you say in your last sentence: 18 "The process of considering threshold 19 embedded generation will be similar to 20 that indicated in the response to 21 Interrogatory E1-62." (As read) 22 So again, you are suggesting that one possible 23 mechanism for making this discrimination will be to ask 24 the Board to do it? 25 MR. CURTIS: Yes. I think you started off by 26 saying Interrogatory 62, but I think you meant 64, did 27 you not? 28 MS LEA: I am sorry, I had two people talking Les Services StenoTran Services Inc. 613-521-0703 713 OHNC PANEL 1, ex (Lea) 1 to me and the same thing I believe. 2 MR. CURTIS: If you refer to 64 -- 3 MS LEA: Yes. 4 MR. CURTIS: -- our response there refers back 5 to 62. 6 MS LEA: Right. 7 MR. CURTIS: And it was in the same context? 8 MS LEA: Yes. 9 MR. CURTIS: Given that there would be a 10 section 92, that this could be tacked onto that. 11 MS LEA: Yes. 12 MR. CURTIS: That's one part of my case. 13 MS LEA: Yes. 14 One moment. 15 --- Pause 16 MS LEA: I wanted to ask a couple of questions 17 about a minimum billing, which I gather you have decided 18 is not an option that should be pursued, or you are not 19 putting it forward, in any event. 20 I gather that Ontario Hydro, the predecessor 21 company, Ontario Hydro, used a minimum billing approach 22 for its direct industrial customers. Is that correct? 23 MR. PORAY: It might have. I am not aware of 24 that. 25 MS LEA: You don't know? 26 MR. CURTIS: No. 27 MS LEA: I think it's in the existing rate 28 structure. Les Services StenoTran Services Inc. 613-521-0703 714 OHNC PANEL 1, ex (Lea) 1 MR. PORAY: Possibly. 2 MS LEA: All right. You will take my word for 3 it, subject to check. 4 MR. PORAY: Yes. 5 MS LEA: All right. 6 Do you know anything about whether there were 7 complaints about this, whether there was unfairness, 8 were there problems with it that have been factored into 9 your decision to not put forward this option? 10 MR. CURTIS: We are not aware of that. To the 11 best of my recollection there wasn't anything brought 12 forward during the stakeholdering process that addressed 13 any issue around minimum billing. 14 MS LEA: Okay. What was your reason for 15 rejecting this approach? 16 MR. PORAY: I think, basically, our thinking 17 was that there was no easy way to quantify what would be 18 our minimum charge for transmission customers. Then 19 given that you have transmission customers that are 20 varying in sizes, and he quoted between 200 kilowatts 21 and 4,000 megawatts, it would be difficult to come up 22 with a minimum charge that would be equitable. 23 MS LEA: What about using historical load and 24 a ratchet structure? Would that be administratively 25 possible? 26 MR. CURTIS: It may be administratively 27 possible. We had some brief discussions in part of the 28 stakeholdering process and the issue quickly got bogged Les Services StenoTran Services Inc. 613-521-0703 715 OHNC PANEL 1, ex (Lea) 1 down in terms of defining what the historical level 2 would be, what is an appropriate historical level. 3 Since we weren't able to get any consensus on what that 4 should be within the stakeholdering process, I think 5 that was the basis why it wasn't pursued. 6 MS LEA: How about using the minimum bills for 7 direct customers for the line connection and transformer 8 connection pools? 9 MR. PORAY: Again, the issue would be what is 10 that minimum level. I don't think in our cost structure 11 it is possible to identify that. 12 MS LEA: The reason you are interested in this 13 approach was it would seem to address the issue of free 14 ridership and also avoid the difficulty the gross load 15 billing approach has in identifying new loads met by new 16 embedded generation. Do you consider that this proposal 17 is worth working on in the future, a minimum bill 18 structure? 19 MR. CURTIS: I think what we were looking for 20 is moving into a contractual basis for this billing. I 21 think that would be our recommendation for the longer 22 term. 23 MS LEA: I wonder if we could discuss that 24 contractual basis. I was looking at the evidence in 25 Exhibit D, Tab 5, Schedule 1, pages 36 and 37. That is 26 Exhibit D, Tab 5, Schedule 1, pages 36 and 37. 27 MR. CURTIS: Yes. 28 MS LEA: I think there you discuss your Les Services StenoTran Services Inc. 613-521-0703 716 1 long-term approach. You are talking about having 2 individual contracts with your customers. Is that 3 right? 4 MR. CURTIS: Yes, that's right. 5 MS LEA: Can you explain to us how this would 6 work? Would you have it with every transmission 7 customer or would they be set on a case-by-case basis? 8 Give me some idea as how this would work, please. 9 MR. CURTIS: Well, they would be with each 10 transmission customer and it would be done on a 11 case-by-case basis, if you will, in terms of -- in fact, 12 every new transmission agreement, because they all have 13 differences, there will be some aspect of case-by-case 14 treatment that would have to be applied. 15 MS LEA: Would these contracts be approved by 16 someone or would they be viewed as part of the 17 transmission tariffs? 18 MR. CURTIS: I think, as we were trying to 19 describe earlier on, we were proposing that we would do 20 some studies in terms of the various contract mechanisms 21 that would be available. We would be talking with our 22 customers and our stakeholders in terms of what the 23 appropriate contracting mechanisms might be, and then we 24 would be bringing a proposal back to the Ontario Energy 25 Board in terms of the contracting basis. That is what 26 we would seek approval for. 27 MS LEA: So the basis of a contract but not 28 each individual one? Les Services StenoTran Services Inc. 613-521-0703 717 1 MR. CURTIS: I doubt that we would want to 2 come back on each individual contract. It would be in 3 terms of the framework and structure of the contracting. 4 Although, I wouldn't want to presume that the Board 5 would necessarily accept that as the basis. 6 MS LEA: On page 37 you describe the reasons 7 why you think this should not be done now. Those 8 reasons include the fact that not all the pieces crucial 9 to the establishment of the contracts are in place. You 10 note, "required regulation, commercial agreements, the 11 transmission system code and the detailed market design 12 processes." 13 Can you give me some examples of what in 14 particular is necessary to be done? 15 MR. CURTIS: Sure. Maybe we could start with 16 the transmission system code. 17 The transmission system code is going to 18 establish the connection agreement framework between the 19 transmission company and its customers. So that in turn 20 would then define what the facilities are that are going 21 to be put in place for each individual customer. So one 22 would feel that we would have to know what those are by 23 a contractual agreement before you could move on and 24 look at how they are going to be billed for in the 25 future. 26 The market design processes have to be put in 27 place because they in part will determine the mechanisms 28 for billing and settlement that will be put in place Les Services StenoTran Services Inc. 613-521-0703 718 1 around transmission services. So those would have to be 2 defined. 3 If all of the portions of the legislation have 4 not yet been put in place, and until those have been 5 declared, the government may seek to put regulation 6 around certain portions of the Act as they are put in 7 place. I think it would be presumptuous on our part to 8 be setting up a contractual framework, given that we 9 don't know what regulations the government may or may 10 not put in place around the various parts of the Act 11 that still not have been declared. 12 So I think those are a few examples of what we 13 are getting at. 14 MR. PORAY: Perhaps if I could just add to 15 that, and that is that the general direction that we 16 have been following was stated in the white paper in the 17 sense that the government is looking for uniform pricing 18 of transmission to all customers. Once you enter into 19 the realm of contracts, you are getting away from that 20 uniformity of pricing because there will be some 21 customers that will have special deals under contracts 22 and others that perhaps won't. So it is a significant 23 move away from the current direction. 24 MS LEA: Yes. And I think that you are 25 anticipating that the earliest this would begin to 26 happen is two years from now. Is that about the time 27 frame you are considering? That is what I understood 28 from your evidence. Les Services StenoTran Services Inc. 613-521-0703 719 1 MR. CURTIS: I don't know that we put forward 2 a point in time when we would be entering into that. I 3 wonder if you could help us in terms of where the two 4 years is. 5 MS LEA: I think that was -- yes, that's 6 right -- it was an answer to a cross-examination 7 question today. Perhaps I misunderstood it. Let me ask 8 the question, then, more openly. 9 What sort of time frame are you considering 10 when all these things might be in place to enable you to 11 begin to do individual contracts? 12 MR. CURTIS: Oh, in terms of what we are 13 talking about here in terms of the list? 14 MS LEA: Yes. 15 MR. CURTIS: Yes, I think two years might be 16 an appropriate time in terms of having these put in 17 place. 18 MS LEA: Yes. 19 MR. CURTIS: But those are what we are putting 20 forward as the preconditions for entering into a 21 contract regime. 22 MS LEA: So over what time frame subsequent, 23 then, to that would you be looking at getting these 24 contracts in place? 25 MR. CURTIS: We would be in a position to 26 bring forward to the Board the contractual frameworking 27 options and that, I think, very shortly after all of 28 these others are put in place, unless we are greatly Les Services StenoTran Services Inc. 613-521-0703 720 1 surprised by how some of these particular pieces have 2 been enacted or enabled. 3 MS LEA: At this time, are you able to assist 4 us with how such individual contracts might deal with, 5 say, the situation where an embedded generator is built 6 and starts displacing load? 7 MR. CURTIS: What time period are we talking 8 about? Are we talking about before this has happened? 9 MS LEA: No. After. Once the individual 10 contracts are starting to come into place. 11 I'm just wondering how these individual 12 contracts will deal with this net versus gross load 13 problem we have been debating. 14 MR. CURTIS: Well, typically what would be 15 envisaged is that the load customer would be approaching 16 the appropriate transmission company, and the only one 17 that I could speak on behalf of would be OHNC, and there 18 would be a negotiation at that point in terms of what 19 they are looking at, in terms of various options as far 20 as installing embedded generation. 21 MS LEA: Thank you. One moment. 22 --- Pause 23 THE PRESIDING MEMBER: Ms Lea, just a 24 follow-up for a moment? 25 MS LEA: Yes. Please. Please go ahead. 26 Thank you. 27 MEMBER VLAHOS: Mr. Curtis, it is going to be 28 a negotiated approach you mentioned. What happens if Les Services StenoTran Services Inc. 613-521-0703 721 1 there is no agreement? Then it comes to the Board 2 automatically? 3 MR. CURTIS: Yes, that is what I would see 4 happening. 5 MEMBER VLAHOS: So it is possible that in 6 every case it will come before the Board? 7 MR. CURTIS: It could happen. I think our 8 hope or expectation is that the parameters would be 9 fairly well set in terms of what we bring back before 10 the Board so that the negotiations within that framework 11 would be fairly obvious in terms of what options or what 12 latitude we as a transmission company had in terms of 13 offering to the load customer who wanted to install 14 embedded generation so that it wouldn't come down to 15 each and every case being so contentious that it would 16 have to be brought before the Board for resolution. 17 MEMBER VLAHOS: Can you help me? Do you have 18 a list in mind as to -- the contractual framework, what 19 would that entail? Price, term. What else would it 20 have in it? 21 MR. CURTIS: In terms of what services were 22 being delivered, in terms of the connection facilities, 23 what loads would be put in place that it was going to 24 serve, the length of time over which the contract would 25 exist, what options the customer had in terms of being 26 able to get out of the existing contract or what options 27 were available to the transmission company in terms of 28 getting out of the contract, what flexibility there was Les Services StenoTran Services Inc. 613-521-0703 722 1 within the contractual framework to change the amounts 2 of embedded generation through the course of the 3 contract. It would be those sorts of areas. 4 MEMBER VLAHOS: Thank you. 5 I'm sorry, Ms Lea. 6 MS LEA: Thank you. 7 Gentlemen, you indicated previously in 8 cross-examination that you have not yet done an impact 9 study related to the Ontario Power Generation proposal, 10 that is a ten-year movement from gross load billing to 11 net load billing on a case-by-case basis. Have I 12 understood the evidence correctly? 13 MR. CURTIS: Yes, you have. 14 MS LEA: What are your views on that approach? 15 MR. CURTIS: I think, as I had stated earlier, 16 the concern we had with that proposal is that reflecting 17 back on what the large industrial customers and the 18 generation developers had told us, starting off at gross 19 load billing wouldn't enable them to go ahead with their 20 projects, so the concern is that it would take five 21 years under what OPGI was proposing before it got down 22 to the point that we are bringing forward in terms of 23 our proposal, namely a 50 per cent access fee or that 24 equivalent. So it is, again, reflecting what our 25 stakeholders have told us, that we didn't see that 26 adopting the OPGI proposal would meet the expectations 27 of the large industrial customers or their generator 28 developers. Les Services StenoTran Services Inc. 613-521-0703 723 1 MS LEA: But if the Board found that proposal 2 to be a good one, could you accommodate it from an 3 administrative perspective? 4 MR. CURTIS: Yes, we could. 5 MS LEA: Can we look at Exhibit D, Tab 5, 6 Schedule 2. Exhibit D, Tab 5, Schedule 2, and I'm 7 looking at page 6 of that proposal -- of that piece of 8 evidence, pardon me, of that schedule. 9 MR. CURTIS: Yes. 10 MS LEA: Okay. You show us, in the last line 11 of page 6, the five-year phase in from gross load 12 billing to net load billing for network only. What 13 would be the difference in the impact if the OPG 14 proposal was accepted? Can you give us at least a 15 directional indication or perhaps some indication of 16 quantifying it? 17 MR. CURTIS: Well, again, to be clear, this 18 table is just looking at 2008 and the forecast of 19 embedded generation, so this is just looking at that one 20 year. If we moved from a five-year phase in to a 21 ten-year phase in, that would tend to diminish the 22 amount of shifting that you see amongst the classes 23 overall. So, in other words, the figure of 24 minus 0.2 per cent for the ten embedded LDCs would tend 25 to be a number closer to zero. 26 MS LEA: Yes, less negative. 27 MR. CURTIS: Yes, less negative. 28 MS LEA: So the negatives would be less Les Services StenoTran Services Inc. 613-521-0703 724 1 negative, so the positives would be less positive. 2 MR. CURTIS: And the positives would be less 3 positive, yes. 4 MS LEA: Yes. So it is just a question of 5 spreading out those impacts or delaying their effect. 6 MR. CURTIS: That's correct. Yes. 7 MS LEA: One moment, please. 8 --- Pause 9 MS LEA: I wonder if you could consider a 10 point put forward in the IPPSO evidence, the first part 11 of the IPPSO evidence, the introductory part. In that 12 evidence it is suggested that with the OHNC gross load 13 billing tariff IPPSO was of the view that small 14 distributed generation projects in the 5 to 20 megawatt 15 range would not attract investment. 16 Have you had an opportunity to consider that 17 statement and do you agree with it? 18 MR. CURTIS: One of our problems in this is 19 that we really don't have any basis for being able to 20 evaluate whether a particular generator, whatever size, 21 would be able to go into service under any regime. We 22 don't have their costing available to us in terms of 23 being able to assess it. So I think we have to take 24 them in terms of what they are asserting, that without a 25 discount on the transmission tariff side those projects 26 would not be economic to go forward. 27 MS LEA: So you are saying that you accept 28 what they say, then? Les Services StenoTran Services Inc. 613-521-0703 725 1 MR. CURTIS: No. I'm not saying that. I'm 2 saying that I don't have any basis of knowledge in terms 3 of doing that assessment. They are the ones that are 4 putting forward that position. 5 MS LEA: So you are not aware of any evidence 6 to support their position or to discount it at this 7 point? 8 MR. CURTIS: None that we have entertained in 9 terms of our assessment, no. 10 MS LEA: Okay. Thank you. 11 In Mr. Fagan's evidence for IPPSO there is 12 also a statement regarding cost shifting and he says, at 13 page 14 of his evidence, I don't think you need to turn 14 it up but I will give you the issue: 15 "There is no unreasonable cost shifting 16 with net load billing and separate 17 connection and transformation pools." 18 (As read) 19 Would you agree with that statement? What are 20 your views on his assessment there? 21 MR. PORAY: I think, in all fairness, we were 22 confused. We couldn't understand what was meant in that 23 statement. 24 MS LEA: Okay. Well, I can't speculate on it. 25 I wonder, is the fact that OHNC does not account for 26 transmission savings due to new generation, is that a 27 factor here in what he is discussing in your view, or do 28 you even understand it to that level? Les Services StenoTran Services Inc. 613-521-0703 726 1 MR. PORAY: My level of understanding was that 2 he was dealing in terms of cost shifting -- the way I 3 understood it, and that's actually not clear yet, was 4 that having identified the line connection and the 5 transformation connection pool, we were minimizing cost 6 shifting. That's the extent of my understanding of 7 that. 8 MS LEA: Thank you. I will leave that to his 9 further explanation. 10 The last thing I wanted to ask you about, I 11 think it's the last thing, has to do with a capacity 12 backup service for transmission. In the Board decision, 13 the earlier Board decision this year, regarding OHNC at 14 page 64, the Board asked that regulated backup charges 15 be investigated as an option. It was page 64 of the 16 decision. 17 We asked you about that in Interrogatory 117. 18 I think that must have been one of our interrogatories, 19 so it would be E, Tab 1, Schedule 117. In that 20 interrogatory, you explained your reason for not 21 bringing forward at this time a proposal for backup 22 transmission service. 23 MR. PORAY: I don't think that -- E17 deals 24 with cost allocation. 25 MS LEA: Maybe did I say the wrong number? 26 117. Sorry about that if I gave you the wrong number. 27 1127. 28 MR. PORAY: Yes, that's the one. Les Services StenoTran Services Inc. 613-521-0703 727 1 MS LEA: Okay. Thank you. In this 2 interrogatory, Exhibit E, Tab 1, Schedule 117, you 3 explain the reason that you have not brought forward 4 such a proposal at this time. You indicate that the 5 transmission system code and customer connection 6 agreement framework need to be established and at that 7 point you would consider offering backup service. 8 In the discussions that you were involved in 9 regarding these codes and agreements, are you aware of 10 anything that would preclude you from offering a backup 11 service if the Board thought that it was a good idea? 12 MR. PORAY: When we talk about backup service, 13 are we talking about backup service to mitigate the net 14 versus gross load billing or just generally, that there 15 should be a backup service for transmission? 16 MS LEA: I guess -- I'm not sure I can answer 17 your question completely. We were thinking for 18 non-coincident peak charge determinants. We wouldn't 19 need backup for coincident peak. 20 MR. PORAY: That is correct. 21 MR. CURTIS: That's correct, yes. 22 MS LEA: Maybe we do. Just a moment. That's 23 what I said, I think. That's all right. I like to get 24 it clear. I need all the help I can get. I think what 25 I said was correct. 26 For non-coincident peak you need it. For 27 coincident peak, you don't need it. Am I right? 28 MR. PORAY: That is correct, yes. Les Services StenoTran Services Inc. 613-521-0703 728 1 MS LEA: Okay. Thank you. It's in that 2 context that we were asking about this. 3 MR. PORAY: I think possibly that would be 4 something that might be considered under the connection 5 agreement discussions. 6 MS LEA: And do you know if it is being 7 considered under the connection agreement discussions? 8 MR. CURTIS: I think in terms of what we are 9 talking about here as far as the connection agreement is 10 again defining with the customer what exactly they 11 are -- what services exactly they are contracting with 12 us or with their transmission provider. 13 On that basis then, that's the basis that we 14 feel would have to be put in place in order to determine 15 then what the appropriate backup would be that they 16 might be contracting for. 17 MS LEA: So from what I -- if I take it from 18 what you are saying then, you have not ruled out the 19 provision of this service if the customer requires it, 20 but at this time you are not yet ready to put a proposal 21 forward. Is that correct? 22 MR. PORAY: I think that's a fair assessment. 23 Yes. 24 MR. CURTIS: That's fair. 25 MS LEA: Okay. Thank you. One moment. 26 --- Pause 27 MS LEA: Thank you very much, gentlemen. 28 Those are my questions. Les Services StenoTran Services Inc. 613-521-0703 729 1 Thank you very much, Mr. Chairman. 2 THE PRESIDING MEMBER: Thank you, Ms Lea. 3 Mr. Coburn, you are in the hot seat. Do you 4 want to start then? 5 MR. COBURN: Thank you, sir. 6 FURTHER CROSS-EXAMINATION 7 MR. COBURN: Good afternoon, panel. I just 8 have about five minutes worth of questions, so it won't 9 take very long. 10 We had some discussion earlier today and on 11 Friday around Decision 2000-1, the Alberta decision. 12 I'm just wondering if you can tell me, because it's not 13 clear to me from looking at the excerpts, was the 14 proposal before the Alberta Board one which 15 distinguished between network and connection charges, or 16 were they all wrapped up in a bundle? 17 MR. CURTIS: I think our understanding is that 18 connection charges were to be handled through a 19 contracting mechanism and so what was being looked at 20 was around network by and large, but again, that's our 21 understanding of it. 22 MR. COBURN: Sir, in response to a number of 23 questions that we had both Friday, Thursday and today, 24 you have alluded to the stakeholdering process and your 25 desire to strike a balance between stakeholder concerns, 26 and I took that to mean perhaps competing stakeholder 27 concerns. Were there any generic criteria that were 28 brought to bear in order to achieve a balance by you? Les Services StenoTran Services Inc. 613-521-0703 730 OHNC PANEL 1, cr-ex (Coburn) 1 MR. CURTIS: We used the initial principles 2 that we have set out. I don't know that we ended up 3 with a generic objective set of criteria in the end to 4 try and balance out. We have talked a few times today 5 about looking at the aggregate impact on customers in 6 the end to try and come up with a balanced proposal to 7 put before this Board. 8 MR. COBURN: By aggregate impact, you are 9 referring to the issue of cost shifting. 10 MR. CURTIS: Yes. 11 MR. COBURN: Was that at the end of the day 12 the primary or the only concern that motivated you in 13 your circle balance? 14 MR. CURTIS: No. I wouldn't say that was the 15 only. 16 MR. COBURN: Was it your predominating 17 concern? 18 MR. CURTIS: Well, it relates back to the cost 19 shifting in terms of what infrastructure, what framework 20 rather that we would be putting into place with this 21 ruling and going forward, whether or not it might lead 22 to more or less cost shifting among customers for that. 23 --- Pause 24 MR. COBURN: Sorry. I recall in one of his 25 questions to you, Mr. Campbell suggested with net load 26 billing the customer would capture all of the benefits 27 of installed generation. Do you recall that being put 28 to you and you agreed with that? Les Services StenoTran Services Inc. 613-521-0703 731 OHNC PANEL 1, cr-ex (Coburn) 1 MR. CURTIS: I think he was talking in terms 2 of the context of new load growth on the network side of 3 the system and that if net load billing was put in place 4 that customers taking advantage of net billing at that 5 particular point would capture a considerable amount of 6 the benefits as a result of the load growth would occur, 7 whereas with the existing infrastructure, given the fact 8 that it isn't sort of fully utilized at this particular 9 point in time, increasing load on the existing 10 infrastructure would result in an overall decrease in 11 terms of rates paid by all customers because it would be 12 spread over a larger number of megawatts. I think that 13 was the context that Mr. Campbell put it to me. 14 MR. COBURN: Okay. I'm not sure I understood 15 it that way. I thought it was a more general 16 proposition, but that's fine. 17 So the last question, just for information: 18 Can you confirm for me that the proposal that you have 19 brought forward for the treatment of existing embedded 20 generation, that that would be unaffected by changes in 21 ownership of the generation? 22 MR. PORAY: Yes, that's correct. 23 MR. CURTIS: Yes, that's correct. 24 MR. COBURN: Would it be also unaffected by 25 the manner in which the generation is being used, if 26 it's being used on an occasional as opposed to a 27 full-time basis? I guess there would be implications. 28 MR. CURTIS: Yes, there would be implications, Les Services StenoTran Services Inc. 613-521-0703 732 OHNC PANEL 1, cr-ex (Coburn) 1 but -- 2 MR. COBURN: But the treatment would not 3 change? 4 MR. CURTIS: Unless we are talking about 5 increasing the output for example of the specific 6 generator. If it's being used within the context of its 7 original contract, then yes, we would agree with that. 8 MR. COBURN: Those are all my questions. 9 THE PRESIDING MEMBER: Thank you, Mr. Coburn. 10 Mr. Mark, MEA. 11 CROSS-EXAMINATION 12 MR. MARK: Yes. Thank you, Mr. Chairman. 13 Gentlemen, I haven't had the pleasure yet of 14 asking you any questions so I will introduce myself. 15 Alan Mark, representing the Municipal Electric 16 Association. 17 If I could ask you first, if you would, 18 please, to turn up Exhibit G3.1, which I understand was 19 presented to you initially by TransAlta. 20 --- Pause 21 MR. CURTIS: Yes. 22 MR. MARK: Do you have that? 23 MR. PORAY: Yes, we do. 24 MR. MARK: Now, just -- 25 MS LEA: Three-point-one? 26 MR. MARK: G3.1. 27 THE PRESIDING MEMBER: In view of the title, 28 that is the one that Mr. Budd -- Les Services StenoTran Services Inc. 613-521-0703 733 OHNC PANEL 1, cr-ex (Mark) 1 MR. MARK: That is net versus gross load 2 billing. 3 THE PRESIDING MEMBER: We have it. 4 MR. MARK: The Panel have it? 5 THE PRESIDING MEMBER: Yes, we do. Thank you. 6 MR. MARK: Thank you, Mr. Chairman. 7 Now, gentlemen, just to clarify first, if we 8 look at this in the left-hand column under the heading 9 gross gross, you understand, do you not, that that is 10 reference to the current OHNC proposal before the Board. 11 Correct? 12 MR. CURTIS: That was our understanding, that 13 it's what we proposed. 14 MR. MARK: To be, strictly speaking, correct, 15 it would really be 50 per cent -- 16 MR. CURTIS: Yes. 17 MR. MARK: -- gross for efficient generation? 18 MR. CURTIS: Yes. 19 MR. MARK: What is not on here, am I correct, 20 is the true gross gross proposal which was underlying 21 your revenue application last December? 22 MR. CURTIS: That is correct. 23 MR. MARK: Which is the one that the MEA still 24 supports? 25 MR. CURTIS: That is correct. 26 MR. MARK: I'm not sure why it's not on here, 27 but help me to understand perhaps what would happen 28 under that scenario if you used the initial presentation Les Services StenoTran Services Inc. 613-521-0703 734 OHNC PANEL 1, cr-ex (Mark) 1 you made gross gross. 2 But before we do that, gentlemen, just in 3 terms of how we got from your December position to your 4 current position, do I understand correctly that what 5 changed from your perspective is you came up with -- you 6 endeavoured to accommodate stakeholder concerns and came 7 up with a compromise. Is that fair? 8 MR. CURTIS: We weren't successful in coming 9 up with a compromise, but we endeavoured to take into 10 account the interest of various stakeholders in what we 11 put before the Board, yes. 12 MR. MARK: That's right. But you haven't 13 changed since December your view of what the applicable 14 principles are? 15 MR. CURTIS: I think we stated earlier what -- 16 if we didn't have to take stakeholder account into 17 perspective that we would have taken one of the other 18 options, yes. 19 MR. MARK: The point I simply want to make 20 sure I'm understanding correctly is that embedded in the 21 proposal that you are now putting before the Board is an 22 element of an attempt to effect a compromise, moving 23 away from your original proposal, hearing concerns, 24 doing a balancing act and coming up with a consequent 25 proposal which you believe offers something to 26 stakeholders in consideration of their particular 27 concerns? 28 MR. CURTIS: That is correct, except I Les Services StenoTran Services Inc. 613-521-0703 735 OHNC PANEL 1, cr-ex (Mark) 1 wouldn't use your word "compromise" in that because I 2 don't think we have achieved that. 3 MR. MARK: I don't use "compromise" in the 4 sense of to suggest that there has been consensus 5 around it. 6 MR. CURTIS: Oh, all right. All right. 7 MR. MARK: But from your perspective, let's be 8 clear, you intended to achieve a compromise between 9 positions of various stakeholders. 10 MR. CURTIS: Yes. 11 MR. MARK: That's what you did from last 12 December until now? 13 MR. CURTIS: That was our intent, yes. 14 MR. MARK: Now, if we go back to G3.1, if we 15 were to put a fourth column out on the right and call it 16 the "True Gross True Gross Position", am I -- 17 MR. CURTIS: Yes. 18 MR. MARK: If you look firstly at the first 19 set of numbers under example one, which is where you 20 have your basic no added or no embedded generation, the 21 numbers in this new fourth column would be the same: 22 100, 100, 200, and 200? 23 MR. CURTIS: Exactly. 24 MR. MARK: If we go down to example number two 25 where we now have 50 megawatts of merchant generation 26 embedded in the distributor -- am I correct in my 27 understanding of what example two is? 28 MR. CURTIS: That's how it was presented to Les Services StenoTran Services Inc. 613-521-0703 736 OHNC PANEL 1, cr-ex (Mark) 1 us, yes. 2 MR. MARK: Am I correct that the numbers on 3 the right-hand most column now would still reflect for 4 the gross gross position: 100, 100, 200, 200? 5 MR. CURTIS: Yes, that is correct. 6 MR. MARK: When we get down to example three, 7 when we add into the scenario the assumption that you 8 have an additional 80 megawatts of generation embedded 9 behind the customer's meter, would the numbers in this 10 new column on the right still stay the same and be: 11 100, 100, 200, 200? 12 MR. CURTIS: Yes, it would. 13 MR. MARK: Now, I believe that when Mr. Budd 14 was asking you some questions about this exhibit, one of 15 the concerns he seemed to be addressing was this 16 question that it seemed, notionally anyways, to be 17 preferable that if the LDC bill would be the same as the 18 sum of the two customer bills. Do you recall that 19 discussion? 20 MR. CURTIS: Yes, I do. 21 MR. MARK: Am I correct that under the true 22 gross true gross proposition that I have just taken you 23 through you do get in each and every scenario a matching 24 of the amount of the LDC bill with the total amount of 25 the two customer bills? 26 MR. CURTIS: Yes, you do. 27 MR. MARK: Now, the other issue, as we read 28 the transcript, that Mr. Budd seemed to be addressing, Les Services StenoTran Services Inc. 613-521-0703 737 OHNC PANEL 1, cr-ex (Mark) 1 was the question of whether customer one got similar 2 treatment in all three scenarios. Correct? 3 MR. CURTIS: Yes, it was. 4 MR. MARK: Am I correct that under the true 5 gross true gross scenario I have put to you, that 6 concern is met in that the treatment of customer one 7 stays the same in all three scenarios? 8 MR. CURTIS: Yes, that's correct. 9 MR. MARK: Now, the TransAlta proposal which 10 underlies the net gross column, as they had put it 11 together, you will agree with me discriminates between 12 LDC customers and other customers. Correct? 13 MR. CURTIS: LDC customers get a different 14 treatment than other customers, that's correct. 15 MR. MARK: The justification, as I understand 16 it, to the extent one has been put forward in the 17 process you have been involved in for doing that, is the 18 notion that LDCs -- I believe is the notion that LDCs 19 wold somehow be getting something that is not coming to 20 them because they haven't built this generation. 21 Is that your understanding of the position 22 taken in the process? 23 MR. CURTIS: No, I don't think that is exactly 24 how it has been presented to us. 25 Our understanding is it is around the 26 complexity of how the transmission charges get 27 translated down to the end use customer level in a 28 process that isn't either, in your instance, pure gross, Les Services StenoTran Services Inc. 613-521-0703 738 OHNC PANEL 1, cr-ex (Mark) 1 or, in the TransAlta position, of the net gross proposal 2 that they have put forward. 3 MR. MARK: So the concern, as you understand 4 it, underlying the proposal that the LDC has a different 5 treatment, that is the gross billing, is a concern of 6 how it would, if it got the net billing, translate the 7 savings into bills for the customers? 8 MR. CURTIS: For the end use customers and an 9 issue then of comparing one LDC to another LDC in terms 10 of the benefits that the end use customers would 11 realize. 12 MR. MARK: All right. 13 Dealing with the first question, that issue of 14 how you translate the savings that the LDC might get if 15 it was billed on net basis into the rates to its 16 customers is not something you have addressed in your 17 work or your filing? 18 MR. CURTIS: That's correct. We have stayed 19 away from that because, again, we have been told by our 20 stakeholders that that may be more appropriately 21 addressed during a distribution rates proceeding. 22 MR. MARK: Fair enough. But to be clear, 23 there are clearly ways that the LDC could have billed on 24 a net basis, passed the savings on to, amongst other 25 scenarios, to the customers who are responsible for 26 bringing this efficient generation on-line. Correct? 27 MR. CURTIS: There certainly could be 28 mechanisms put in place to do that, yes. Les Services StenoTran Services Inc. 613-521-0703 739 OHNC PANEL 1, cr-ex (Mark) 1 MR. MARK: And indeed you could, there is no 2 reason why the LDC could not take those benefits and use 3 it to encourage the establishment of efficient merchant 4 generation in its district? 5 MR. PORAY: I think the issue there would be 6 that the LDC may be prohibited from doing that. As a 7 wires company it should not be giving signals or 8 advantages to generation. 9 MR. MARK: Well, I would think that one might 10 have said that about using transmission rates to give 11 incentives to generation too. Let's not go ahead to the 12 issue of what the Board might or might not allow, but my 13 point at the end of the day is this: Unless you give 14 the LDCs the same opportunity that other customers have, 15 you are effectively cutting merchant generation out of 16 the group of people who could possibly take advantage of 17 this? 18 MR. CURTIS: I think potentially that's 19 correct, yes. 20 MR. MARK: There were some questions that were 21 put to you on behalf of AMPCO respecting increased 22 metering costs and data collection costs. Do you recall 23 those discussions? 24 MR. CURTIS: I believe these were around the 25 cut-off limit at one megawatt that we were talking about 26 for efficient generation. 27 MR. MARK: I think that's correct. 28 I want to make sure we are clear. As I Les Services StenoTran Services Inc. 613-521-0703 740 OHNC PANEL 1, cr-ex (Mark) 1 understand it, one of the objections that is made 2 sometimes to the proposal or one of the issues is 3 whether you have to incur a metering cost to get gross 4 billing. 5 MR. CURTIS: Yes. 6 MR. MARK: There has been a suggestion that 7 that's a cost which could be avoided if we go to a net 8 billing proposal. Correct? 9 MR. CURTIS: That's been proposed, yes. 10 MR. MARK: Am I correct that in any event, so 11 long as you proceed with gross load billing for line 12 connections you are in any event going to have to be 13 metering the generators if they are over one megawatt? 14 MR. CURTIS: Yes. 15 MR. PORAY: That's correct. 16 MR. MARK: And that is your proposal before 17 this Board? 18 MR. CURTIS: Yes, it is. 19 MR. MARK: And to the extent down the road in 20 some forum, I am not sure where and when, it is decided 21 that the competition transition charge, the CTC, should 22 be levied on a gross basis, then you will already under 23 your proposal have the metering and indeed the whole 24 infrastructure in place for ensuring that that can 25 happen at no incremental cost? 26 MR. CURTIS: If that's how the CTC is 27 determined, that's correct, yes. 28 MR. MARK: Under your cross-examination by Mr. Les Services StenoTran Services Inc. 613-521-0703 741 OHNC PANEL 1, cr-ex (Mark) 1 Brown for IPPSO, Mr. Brown, as I understand it, was 2 putting to you certain advantages of the net billing 3 proposal and you in your responses referred to certain 4 advantages of gross load billing. Do you recall that? 5 MR. CURTIS: Yes, I do. 6 MR. MARK: And one of them I believe you 7 referenced was, as you have said on several occasions, 8 gross billing avoids the cost shifting to other 9 customers. Correct? 10 MR. CURTIS: Yes. 11 MR. MARK: And you referenced as well that 12 your proposal or a gross billing proposal recognizes 13 that even customers with embedded generation do get 14 transmission system benefits. Correct? 15 MR. CURTIS: Yes, that's correct. 16 MR. MARK: And to take that back to some 17 questions you were asked more recently by Mr. 18 Klippenstein today, when he was asking you about the 19 user pay and I don't want to get into that, trust me. 20 MR. CURTIS: Thank you. 21 MR. MARK: I want to be clear that there are 22 benefits not just with respect to that portion of the 23 load that stays on the system, but there are benefits to 24 that customer with respect to the new load or the 25 displaced load in terms of transmission system benefits. 26 Correct? 27 MR. CURTIS: That's what we feel, yes. 28 MR. MARK: And amongst those would be the fact Les Services StenoTran Services Inc. 613-521-0703 742 OHNC PANEL 1, cr-ex (Mark) 1 that when outages occur, planned or unplanned, they take 2 the transmission service for that load. Correct? 3 MR. CURTIS: That's correct. 4 MR. MARK: Is another advantage of the gross 5 load billing over net load billing one of the ones that 6 was also identified by the MDC in their recommendation, 7 which is that gross load billing will not have the 8 effect of encouraging generation which is uneconomic? 9 MR. PORAY: That's correct. 10 MR. MARK: And just to touch on a couple of 11 final matters, you were having a discussion earlier 12 today with Mr. Klippenstein about this Table 2 forecast 13 document. Do you recall that? 14 MR. CURTIS: Yes, I do. 15 MR. MARK: This is purely a question of 16 clarification. I want to make sure I understand your 17 evidence on this. Who prepared this forecast? 18 MR. PORAY: Can we just get the document? 19 MR. MARK: Yes. The most convenient reference 20 is his Exhibit G.4.2. 21 MR. PORAY: This is Table 3 on page 7 -- no, 22 Table 2, sorry. Table 2 on page 5. Which table are you 23 referring to? 24 MR. MARK: I am referring you to the one which 25 is headed "Table 2: Forecast of New Embedded Generation 26 by 2008". 27 MR. PORAY: We have it. 28 MR. MARK: My note of your evidence, and Les Services StenoTran Services Inc. 613-521-0703 743 OHNC PANEL 1, cr-ex (Mark) 1 please correct me if I am wrong, was that you had no 2 view yourself, that is as a corporation, OHNC, as to 3 whether this forecast will or won't be achieved and you 4 haven't based anything on any assumption as to whether 5 it will or won't be achieved? 6 MR. CURTIS: No. I think the line of 7 questioning was whether there was a relationship between 8 this forecast and the resolution of the net versus gross 9 load issue in terms of the amount of new embedded 10 generation that would actually occur. 11 This forecast was prepared by our consultant 12 and we are accepting that as the forecast for embedded 13 generation. 14 MR. MARK: So clarify for me, when you say you 15 haven't made any assumption about its correctness in 16 connection with the choice between gross or net load 17 billing. 18 MR. CURTIS: Yes. 19 MR. MARK: Then what is it that you mean to 20 say? 21 MR. CURTIS: Well, this forecast was put 22 together by our consultant, looking at what the 23 potential was in terms of the installation of embedded 24 generation, first of all, and then they established a 25 probability of the generation actually being installed 26 to come up with these final numbers that are there. 27 MR. MARK: And is that a probability which 28 takes into account the savings or benefits that would be Les Services StenoTran Services Inc. 613-521-0703 744 OHNC PANEL 1, cr-ex (Mark) 1 derived from net load billing? 2 MR. CURTIS: No. 3 MR. MARK: So this is a forecast that's 4 independent of whether or not you get gross or net load 5 billing? 6 MR. CURTIS: That was the way the forecast was 7 provided to us by our consultant, yes. 8 MR. MARK: So am I correct then that your 9 consultant did not first do, if you will, a base line 10 forecast without net load billing and then do a forecast 11 with net load billing, that's not the analysis that he 12 went through? 13 MR. PORAY: No. That's right. That's 14 correct. 15 MR. MARK: So you can't then from this 16 analysis, in any event, tell us what amount, if any, or 17 what amount, if any, of the 2,550 figure would 18 constitute free riders, that is people who would put in 19 these installations or reconnect these installations 20 regardless of whether or not you gave them net load 21 billing? 22 MR. CURTIS: That's correct. 23 MR. MARK: A final subject, gentlemen, and we 24 will get out of here right on time. Mr. Poch and some 25 others were asking you some questions about the benefits 26 to the transmission system, so the benefits to other 27 users of the transmission system that could occur from 28 embedded generation. I think you have been asked that Les Services StenoTran Services Inc. 613-521-0703 745 OHNC PANEL 1, cr-ex (Mark) 1 on several occasions. 2 MR. CURTIS: Yes. 3 MR. MARK: Now, you haven't, as I understand 4 it, you don't have for us a calculation of those 5 savings? 6 MR. CURTIS: That is correct. In terms of the 7 ones Mr. Poch was alluding to, that's correct, we don't. 8 MR. MARK: Is it fair to say you haven't 9 endeavoured to come up with a scheme which reflected in 10 the savings to customers building the generation an 11 amount of the savings which reflects any estimate even 12 of the amount of the benefits? 13 MR. CURTIS: That's correct. 14 MR. MARK: There may be a coincidence of the 15 saving to somebody and a benefit to somebody else, but 16 let's be clear your proposal doesn't endeavour to match 17 them up. It's a consequence, not an objective? 18 MR. CURTIS: That's correct, yes. 19 MR. MARK: And it may be, I take it, that at 20 some future time it will be possible to approach that 21 task when you are in a better position to identify the 22 savings? 23 MR. CURTIS: Well, it may be. I guess just to 24 clarify, many of the benefits that Mr. Poch talked about 25 were on the commodity side and one of the issues that we 26 are bringing before the Board is the degree to which 27 these principles should be incorporated in terms of the 28 design of the transmission tariff. We have tried in Les Services StenoTran Services Inc. 613-521-0703 746 OHNC PANEL 1, cr-ex (Mark) 1 terms of our development to focus in on those factors 2 that are directly related to transmission services and 3 not bring in the commodity related. 4 MR. MARK: I understand there are many 5 stakeholders, including my client, who have rather 6 vehemently taken the position that if you want to 7 encourage certain types of generation do it directly and 8 not through your transmission rates. Correct? 9 MR. CURTIS: Yes, we have heard that by many. 10 MR. MARK: Yes. And to the extent though -- 11 my point is this: To the extent that people have been 12 able to identify possible benefits to the transmission 13 system by the encouragement of this additional 14 generation, there is no attempt in your proposal to 15 match the savings and the benefits. It's an incidental 16 consequence. 17 MR. CURTIS: Yes. We took no direct analytic 18 effort to try and incorporate them into our proposal. 19 MR. MARK: And I suppose following up from 20 where Mr. Campbell was at one point, if, as and when 21 some number of years down the road when somebody gets 22 into transmission planning because the issue gets more 23 constrained, substantially more constrained than it is 24 now, presumably then we will have some data which 25 actually would allow one to see whether you can make a 26 matching of transmission system benefits and savings to 27 customers who put in the generation? 28 MR. CURTIS: Well, that might be a Les Services StenoTran Services Inc. 613-521-0703 747 OHNC PANEL 1, cr-ex (Mark) 1 possibility, but our view is that going full out there 2 won't be that transmission system planning that will 3 take place. It will be driven by the market forces in 4 terms of transmission investment and the implicit 5 assumption is that all those are incorporated in the 6 market forces then that take place. 7 MR. MARK: And I suppose from an economist's 8 point of view that's the most perfect matching of 9 benefits and savings you could get, isn't it? 10 MR. CURTIS: Yes. 11 MR. MARK: Thank you, gentlemen. 12 Thank you, Mr. Chairman. 13 THE PRESIDING MEMBER: Thank you, Mr. Mark. 14 Let's have a look to tomorrow. Do we know how 15 many people still wish to cross-examine on the net 16 versus gross load billing? Do we have any view? 17 MS LEA: I think Mr. Roger White indicated 18 that he had a few questions. 19 THE PRESIDING MEMBER: No one else that you 20 are aware of? 21 MS LEA: I am not aware of anyone else. 22 THE PRESIDING MEMBER: So we had better start 23 with him in the morning, then finish up anybody else on 24 that. Then we will move onto issue four, Export and 25 Wheeling-through transactions. 26 MS LEA: No. 27 MR. ROGERS: No, Mr. Chairman. 28 THE PRESIDING MEMBER: You wanted to go off -- Les Services StenoTran Services Inc. 613-521-0703 748 1 yes, okay. 2 MR. ROGERS: I didn't want to. I was forced 3 to -- 4 THE PRESIDING MEMBER: That is what I had 5 forgotten about. So we will move on with that as the 6 next issue then, tomorrow. Okay. 7 That could be most of the day, depending on 8 questions. 9 MR. ROGERS: The survey I have done, which is 10 not complete by any means, suggests that the definition 11 of transmission customer should not take all that long 12 and I expect to be into the second panel tomorrow. 13 THE PRESIDING MEMBER: Okay. So that is what 14 we will look at then tomorrow. 15 All right. We will see everybody at nine 16 o'clock sharp tomorrow. Thank you. 17 --- Whereupon the hearing adjourned at 1705, to 18 resume Tuesday, February 22, 2000 at 0900 19 20 21 22 23 24 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 749 1 INDEX OF PROCEEDING 2 PAGE 3 Upon resuming at 0932 543 4 Preliminary Matters 543 5 OHNC PANEL 1 6 PREVIOUSLY SWORN: DAVID CURTIS 544 7 PREVIOUSLY SWORN: ANDY PORAY 544 8 Further Cross-examination by Mr. Mattson 545 9 Further Cross-examination by Mr. Poch 557 10 Upon recessing at 1105 605 11 Upon resuming at 1125 606 12 Further Cross-examination by Mr. Greenspoon 614 13 Further Cross-examination by Mr. Campbell 630 14 Upon recessing at 1245 656 15 Upon resuming at 1405 656 16 Cross-examination by Mr. Klippenstein 660 17 Upon recessing at 1530 703 18 Upon resuming at 1553 703 19 Further Examination by Ms Lea 703 20 Further Cross-examination by Mr. Coburn 729 21 Cross-examination by Mr. Mark 732 22 Upon adjourning at 1705 748 23 24 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 750 1 EXHIBITS 2 NO. PAGE 3 G4.1 Section 14(3) of the Alberta 642 4 decision in the 1999-2000 5 General Rate Application 6 G4.2 Document entitled "Pollution 678 7 Probe Cross-examination References" 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 751 1 UNDERTAKINGS 2 NO. PAGE 3 F4.1 Mr. Curtis undertakes to indicate 589 4 how many MEUs OHNC or it's parent 5 company has corresponded or met 6 with concerning a potential merge 7 with the distribution entity 8 F4.2 Mr. Rogers undertakes, on a best 690 9 efforts basis, to advise whether 10 it is possible to provide the 11 forecast for all options in Table 6, 12 Exhibit D, Tab 5, Schedule 2, page 7 13 of 7, in real dollars including 14 inflator, et cetera 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Les Services StenoTran Services Inc. 613-521-0703 752 1 ERRATA ADDENDA 2 3 Volume 1, Wednesday, February 16, 2000 4 PAGE LINE 5 53 2 6 s/b "If the load paid for its transmission services..." 7 102 6 8 "MR. CURTIS:" s/b "MR. COBURN:" 9 102 13 10 "MR. CURTIS:" s/b "MR. COBURN:" 11 103 13 12 "MR. CURTIS:" s/b "MR. COBURN:" 13 14 Volume 2, Thursday, February 17, 2000 15 16 PAGE LINE 17 229 11 18 "and power load" s/b "and parallel" 19 311 15 20 "designed" s/b "demand"